A consumers’ charter, a blow for equality or a formula for tragedy? If there’s one thing warring parties can agree on when it comes to the Competition Commission’s plan for a level playing field in the vehicle service and repair industry, it’s that they can’t agree.

The commission’s recent publication of its final draft report on "guidelines for competition in the SA automotive aftermarket industry" has re-emphasised gaping divisions between the haves and have-nots.

The biggest group of "haves" are SA’s 1,600 franchised new-vehicle dealerships, which pay motor companies (also known as original equipment manufacturers, or OEMs) handsomely for the right to sell and service their vehicles. Joining them are manufacturers of OEM-approved spare parts, plus a select group of panel beaters and other suppliers of aftermarket services.

The "have-nots" are everyone else: thousands of independent mechanics, repairers, fitment centres and manufacturers of "unauthorised" replacement parts. The commission calls them independent service providers (ISPs).

It wants the second group to have the same rights as the first. For example, it says the "haves" will no longer be able to claim exclusive rights to vehicles under warranty.

As things stand, OEMs can cancel warranties if services and repairs are not carried out through franchised dealers and if nonapproved replacement parts are fitted.

The commission says that not only is this closed-shop practice unfair to "have-nots" but the lack of competition exposes consumers to overpricing. That is why it says the market will be thrown open to independents.

It’s not clear when this will happen — the mid-March deadline for comment has been postponed to June because of the Covid-19 lockdown — but the commission has left no-one in any doubt that it’s coming.

Proponents of change, naturally, are cock-a-hoop. Gunther Schmitz, chair of the Right to Repair SA lobby group, says: "It is encouraging to see such a strong focus on increased consumer choice, fair competition and fair pricing. We want an environment where consumers can select where their vehicles are serviced, maintained and repaired, at competitive prices and in the workshop of their choice."

The Motor Industry Workshop Association, which claims to represent 2,500 repairers, fitment centres and others, says the legislation will increase consumer choice without compromising quality.

But will it? That’s one of the big debating points. Can a small, independent workshop really provide the same quality and consumer peace of mind as a dealer who has invested millions of rands on diagnostic and other state-of-the-art equipment to meet international standards, and millions more on training staff to use it?

Here’s a brief guide to the main points of the commission’s final draft report:

  • Service and repair work on vehicles under warranty will no longer be reserved for franchised dealers and other traditional service providers. In future, OEMs must approve any ISPs that meet their standards and specifications.
  • These ISPs may work on as many brands as they like, as long as they are approved by each one.
  • OEMs must provide ISPs with all their vehicles’ technical information, including manuals, component and diagnostic information, wiring diagrams and software calibration. The only exclusion is vehicle antitheft data. The information must be provided on the same terms as to franchised dealers.
  • OEMs must provide the employees of ISPs with the same training as they offer to franchised dealers, at "reasonable" cost.
  • OEMs must ease the entry barriers for new dealers. They may not demand unreasonable investments either in the start-up or later in the life of the dealership. There is no definition of "reasonable" but it can currently cost tens of millions of rands — in some cases, hundreds of millions — to meet some brands’ dealership requirements.
  • Insurance companies may not reserve panel-beating or other repair work for a limited pool of companies, but must share work among all ISPs that meet their standards.
  • Consumers will no longer be required to buy maintenance or service plans as part of the new-vehicle package. These will be voluntary and sold separately.

There’s no doubt that a shake-up of the automotive aftermarket is overdue. Take a simple example. Dealer rationalisation has left many small towns around SA with few, if any, franchised dealers. So even the driver of a mainstream brand may have to travel several hours to and from the nearest dealer for a vehicle service or minor repair. How much more sensible to have an approved ISP on the spot.

Then there are the warranties and service plans that tie customers into "original", often high-priced spare parts. True, they mean you don’t hand over money when your vehicle is serviced, but this is often a false economy because these costs were factored into the purchase price of the vehicle. If you’re a low-kilometre or ultra-careful driver and barely touch the benefits in these plans, you’re not going to get back any of your money.

There’s also nothing wrong with the Competition Commission wanting to bring black operators into an industry that, in the formal sector, is almost lily-white. The more black participants, the better.

But here’s a thing: while the preamble to the report talks grandly of the need for transformation, the guidelines themselves seem to ignore it. They refer broadly to ISPs but not race or gender.

It’s a point seized upon by Mike Mabasa, CEO of the National Association of Automobile Manufacturers of SA (Naamsa). In the association’s official response to the guidelines, he says market expansion "should explicitly focus on the empowerment of historically disadvantaged individuals", with special emphasis on those in townships and rural areas.

SA’s seven car and bakkie manufacturers have pledged R6bn — a figure likely to be swelled eventually by truck and components companies — to racially transform the automotive production and retail chain. While the primary focus will be on components manufacture, the effects will also be felt in retail and the aftermarket.

The key to this structured transformation, which will take place over five years, is sustainability, says Mabasa. There’s no point setting up companies if you don’t also create the business environment for them to flourish.

He advises the Competition Commission against using the guidelines as a "blunt instrument" to "forcefully" create new players. "The automotive aftermarket sector is already a highly competitive and exceedingly contested environment. Exposing new entrants in this ecosystem without providing platforms for growth would be setting up potential beneficiaries to fail before they even start."

Naamsa is one of a number of bodies and companies to suggest the Competition Commission has not thought through the process and is determined to push through its ideas regardless of consequences.

The National Automobile Dealers’ Association (Nada) shares the view that, while it may not quite have negotiated in bad faith, the commission has wilfully ignored suggestions that don’t fit its preconceived ideas.

Nada chair Mark Dommisse describes the guidelines as "totally unworkable".

"It is disheartening to see that none of the constructive input provided by Nada over a three-year period of earnest engagement has been considered," he says.

And Mabasa says: "Clearly our messages fell on deaf ears."

The commission declined to respond to questions from the FM about the consultation process, though it did answer others on specific guideline proposals.

It appears to have accepted that some of its proposals could threaten the safety of passengers and pedestrians. For example, the guidelines say customers will be allowed to fit nonapproved spare parts after the original part’s warranty has expired, without voiding the vehicle warranty. The only exclusions will be security parts that interfere with antitheft devices.

Security above safety? This might be seen as an invitation to fit cheap, unproven brake pads and other safety-related items.

Mabasa says: "We cannot compromise people’s safety through the use of inferior parts which will proliferate without any control … and increase fatalities on our roads."

The commission now says of the warranty exclusions: "We will be adding safety considerations." It adds that it is considering proposals for a standards authority to set quality levels for all spare parts fitted in SA.

That’s not enough for Dommisse, who says safety must underpin everything else. The guidelines’ insistence that accredited ISPs must meet OEM standards should limit the number of "cowboy" repairers, he says, but there must be no shortcuts. It takes several years to become a qualified and experienced automotive diagnostic technician. ISPs must follow the same route.

There are other areas where the guidelines will meet continued resistance. Motor companies oppose the idea that they should be required to provide ISPs with all their vehicles’ technical information.

Naamsa says: "It is unreasonable to expect OEMs to provide and release their proprietary information to third parties as a mandatory requirement."

Then there’s the question of consumer advice. In future, a dealer must tell customers "in clear and explicit terms" that they are not compelled to use approved dealers or ISPs for in-warranty service or repairs — even though this would void the warranty.

This is crazy, says Naamsa: "It will expose customers to unscrupulous entities not accountable to anyone. This line of thinking will open up consumers to abuse."

Elsewhere, the guidelines seek to stop OEMs from favouring certain dealers and aftermarket partners by stating they may not be appointed "for an unreasonably lengthy term". The commission originally considered 10 years to be excessive — an idea that terrified some dealers, who require much longer to recoup their huge investments. The commission now says agreements will be judged individually but that "the period must be justified by investments".

Whatever the final shape of the aftermarket guidelines, Dommisse says they must not be allowed to threaten what already exists. SA’s franchised automotive dealerships have R48bn of investments and employ 60,000 people directly, plus another 25,000 indirectly.

"It’s all very well to encourage jobs and opportunities but not if it means destroying ones that are already there," he says.

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