Watchdog guns for car-repair ‘racket’
Car industry in hot water over warranty provisions
THE days of having to take your car to an “approved” repairer may be coming to an end.
The Competition Commission has summoned manufacturers and insurers to a summit next month after concluding that their policies are impeding competition in the market.
“We are concerned about motorists’ complaints of excessive pricing,” said deputy commissioner Hardin Ratshisusu.
Level 1 BEE-accredited businesses have complained that they are excluded from the ranks of approved repairers, and the South African Auto Repair and Salvage Association said its members were surviving on crumbs because 95% of approved repairers were white-owned.
But Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa, said it was “unreasonable and impractical” to expect carmakers to guarantee repairs or parts provided by third parties.
South African Insurance Association CEO Viviene Pearson said insurers were at the mercy of manufacturers.
“In these cases, the insurers do not have a choice as should they not follow the policies of the manufacturers, the client will lose his/her warranty, which means he/she is put in a situation worse than they were before,” she said.
“On vehicles that are out of warranty, insurers would prefer to use good-quality alternative parts, or used parts for older vehicles especially, but there is a lot of resistance to this, sometimes from customers/policyholders, but mainly from motor manufacturers.”
Pearson also said the aftersales industry was overtraded.
“The short-term insurance industry insures only around 35% of vehicles, [leaving] 65% of vehicles open to anybody.”
CARMAKERS are under the Competition Commission’s microscope for what it terms “restrictive and exclusionary practices” related to after-sales service.
If the commission rules against manufacturers, motorists may no longer be obliged to have repairs done at approved workshops.
An official investigation is yet to be launched, but the commission has summoned manufacturers, insurers, panelbeaters, parts suppliers and salvagers to a workshop next month to thrash out its concerns.
The central issue is manufacturers’ policies compelling owners of vehicles under warranty to use dealerships or approved workshops for repairs — or risk having warranties invalidated. The same policies extend to parts that are not approved.
Insurance companies have similar policies, which the commission says exclude independent workshops and prevent motorists choosing cheaper alternatives.
A study by the commission showed competition between independent and authorised repairers was impeded, said deputy commissioner Hardin Ratshisusu.
“We are concerned about motorists’ complaints of excessive pricing . . . and as a result we want to engage the industry . . . so that we can eliminate any anticompetitive con- duct,” he said.
Complaints to the commission include one from the Department of Economic Development, which was alerted to the issue by level 1 BEE-accredited businesses having difficulty entering the ranks of approved repairers.
A panelbeater from Ladysmith, KwaZulu-Natal, with 25 years’ experience, reported Toyota South Africa to the commission after it rejected his application to become an approved workshop.
Two weeks after the manufacturer declined his application, saying the small town already had an approved workshop, it approved a rival business owned by a white man, the panelbeater said.
“I’ve gone beyond their requirements and they’re still not interested,” said the panelbeater, who asked to remain anonymous. “I’ve even told them the area requires a level 1 BBBEE contributor, and that they need to give me an opportunity.
“Ninety percent of Toyotas around here are driven by black people, and 99% of my clientele is black people. They look for me. So I’m towing the vehicle in and faced with the prospect of it being sent to one of the other two centres.”
Toyota South Africa spokesman Clinton Yon said he did not have time to comment on the specific case, adding: “Toyota South Africa Motors has very specific criteria when selecting service providers, with just one of these being appropriate geographic representation.”
Another complainant, the South African Auto Repair and Salvage Association, said its members were left to share about 2% of the R28-billion repair sector.
Chairman Len Smith said approved workshops were introduced in 2003 by an “old boys’ club” of insurers and repairers. “Whilst there are more black-owned repairers, insurers chose repairers [who are] 95% whiteowned vs 5% black-owned,” he said.
A parts supplier in North West, who also asked for anonymity, said anticompetitive behaviour by two manufacturers went as far as offering to match his prices for nongenuine parts on cars out of warranty.
If approved panelbeaters used nongenuine parts, even if a vehicle was out of warranty, they could lose their approved status, he said.
“At the same time they bar us [independent suppliers] from ordering for vehicles in warranty.”
The National Association of Automobile Manufacturers of South Africa, which represents manufacturers, importers and distributors, said it would not take part in next month’s workshop because policies and strategies were left to individual companies.
However, director Nico Vermeulen said manufacturers had a responsibility to protect customers’ interests and safeguard brand value.
“Warranty protection and the principle of vehicle repairs in accordance with original equipment specifications conform to both objectives. It is unreasonable and impractical to expect vehicle manufacturers and/or vehicle importers to warrant repairs by third parties over which they have no control,” he said.
And since repairs under warranty or maintenance plans generally came at no cost to the consumer, “the entire debate seems somewhat academic”.
Ratshisusu said the EU, France, China, the US and Russia had introduced regulations aimed at eliminating noncompetitive conduct in the after-market vehicle industry. The Russians would share their ex-
There are more black-owned repairers, but insurers chose repairers [who are] 95% white-owned It is unreasonable to expect vehicle manufacturers to warrant repairs over which they have no control
periences at the workshop.
The South African Insurance Association’s CEO, Viviene Pearson, said the panelbeating industry was overtraded, and “insurers, similarly, have only so much repair work for the motor body repairers and not enough for all of them”.
The insurance association had signed an agreement with panelbeaters to assist black-owned businesses get onto lists of approved repairers, said Pearson.
Insurance companies were bound by policies created by carmakers, and in certain cases preferred using “good-quality alternative” parts, she said.