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Dealerships to benefit from new automotive code

Dealerships to benefit from new automotive code

While dealerships may see the new code intended for the automotive sector as filled with doom and gloom, ‘it, in fact, protects and empowers dealerships’, says Gunther Schmitz, Chairman of Right to Repair South Africa (R2RSA).

He says the code protects dealerships in that it requires the Original Equipment Manufacturers (OEMs) to have fair and reasonable selection criteria and limits the OEMs in terms of the investment requirements made on the dealership. “This offers greater security to all the dealerships out there,” he says.

He refers specifically to the section of the code that deals with reducing barriers created by onerous requirements for facilities of dealerships. “The code specifies that OEMs must not impose onerous obligations on prospective dealers. The requirements for dealerships must be reasonable and have an economic rationale, particularly in relation to the size of land, show-rooms, furniture, fittings and finishes.”

It also states that OEMs may not require authorised dealers to make further investments within established facilities if such investments are not objectively required, and OEMs must approve multiple suppliers for required branding and corporate identity elements of dealerships, from which dealers can procure. “Along with that, according to the code, OEMs and approved dealers will need to, in their procurement of goods, support businesses owned by historically disadvantaged individuals and SMMEs,” explains Schmitz. 

Another strong benefit for dealerships will be the opening up of the market so dealerships are not restricted to repair and maintain only one brand. “It’s an opportunity to widen the scope of work for dealerships because the technical information, tools and training to repair all brands and models should, in theory, be available.”

Interestingly dealerships are often paid a greatly reduced labour rate by the OEMs for working on vehicles under maintenance plans. “So, making maintenance plans non-compulsory will allow the dealers to sell competing products and possibly level the playing field between dealers and OEMs.”

Schmitz comments on the current rhetoric from the dealership representatives and questions if indeed comments are on behalf of all dealers or rather a small group of powerful dealership groups that are also importers. “We believe that change is inevitable for this industry and it makes sense to understand the real benefits that this code could offer all stakeholders,” he says.

The Right to Repair campaign aims to allow consumers to select where their vehicles are serviced, maintained and repaired at competitive prices in the workshop of their choice. “There is a need for a fair and competitive regulatory environment that enables freedom of choice for the consumers and gives aftermarket Small Medium Enterprises a chance to stay in business. South African legislature needs to follow the international Right to Repair trend which promotes South Africa’s existing consumer and competition laws. Our objectives are to raise awareness among consumers and bring about this legislative change,” says Schmitz.

“Consumers are growing tired of being restricted and having to pay inflated prices for repairs. Extended warranties are locking consumers into periods where firstly, they have no choice but to use the dealer for repairs and secondly, they are exposed to the inflated pricing structure of OEM dealerships.”

“Ultimately the code will allow franchise dealers to become more competitive and, if they don’t, give the consumer an alternative,” he concludes.

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Automotive Export Manual 2018