Another opinion on the proposed new automotive code
LAST WEEK, we brought you some insight from Right to Repair South Africa’s Filum Ho on the proposed new automotive code and its expected impact on the auto sector.
Ho and the organisation he represents believes that the proposed new automotive code by the Competition Commission, which is a voluntary participatory code, will be of great benefit to South African motorists as well as the industry at large.
However, according to Mark Dommisse, National Chairperson of the National Automobile Dealers’ Association (NADA), the proposed new Code of Conduct will have negative implications for the industry and a requirement for shared thinking is critical. This is particularly the case if the auto sector is rushed in to embracing a new code.
“NADA and its members fully recognise the need to broaden participation in the automotive aftermarket sector and are committed to co-operating and assisting the commission to address matters of concern raised in the proposed new Code of Conduct. The impact of implementing the code in its current form will, however, have a catastrophic effect on the economy as it undermines investment, employment and consumer welfare in this important sector of our economy,” Dommisse expounds.
In a statement released by NADA, it’s stated that South Africa currently has approximately 1600 new franchised automotive dealerships comprising R48 billion worth of investment. It employs 60 000 personnel directly.
NADA says dealers provide substantial benefits to the country and its impact on the overall economy and employment is substantial and far-reaching. Production and sale of automotive products also generates profits for a wide range of industries up and downstream.
“Only around 20% of the entire South African car parc comprises in-warranty vehicles, and it’s this small portion which the new code is addressing. We feel that significant effort and focus should be placed on developing the other 80% of the industry – which is predominantly made up of out-of-warranty vehicles,” says Dommisse.
The automotive retail industry’s contribution to the whole industry includes consulting with government through NADA and the National Association of Automobile Manufacturers (NAAMSA), apprenticeship programmes, a broad range of employee benefits, hundreds of millions in staff training, and funding healthcare and pensions.
“A loss of just one of the seven major manufacturers to South Africa would have unprecedented spill over effects both financially and socially that would far outweigh the current subsidies that manufacturers are receiving,” says Dommisse. “We should also keep in mind that Australia shut down an entire motor manufacturing industry due to adopting controversial codes.”
There’s a lot of heat around the subject of whether car manufacturers should allow non-franchised or independent service outlets to work on vehicles within warranty periods. In fact, NADA in its statement makes it clear that clear lines must be drawn in terms of where customers can go. NADA also makes it clear that the organisation’s views on the matter are not anti-competitive.
“If we were behaving in an anti-competitive manner, the arbiter would have said so, which to date hasn’t happened,” says Dommisse. “Furthermore, the background document to the draft code notes that the basis for the code is derived from complaints related “to potential exclusionary conduct…”, and does not mention anti-competitive behaviour. However, proponents of adopting the code ‘as is’ blame the franchised dealers for just that.”
“To say we are anti-competitive is untrue and defamatory,” says Dommisse. “We want to work with government and we want prosperity for all, but we want it to happen in a responsible manner that does not adversely impact consumer safety, the economy and job creation. We support a code that opens up the market in a way that protects investment, economic sustainability and consumers.
Dommisse notes that the local auto sector is a regulated industry and this protects South African consumers. He believes it will be impossible to effectively regulate a bigger industry in such a short space of time.
By providing world-class training and exposure to global industry best practice, the franchised dealer sector plays an important role in developing the industry and its technicians. Many technicians leave these establishments to start their own businesses, or take up opportunities at other workshops. The skills they acquire are invaluable.
“Furthermore, if someone, or some organisation, is prepared to invest in us and set up costly facilities and services, then we have an obligation to protect them and their investment. This is not anti-competitive, it is responsible business practice.
“We also believe strongly that manufacturers have the right to determine the standards of those that service their products in much the same way that Boeing does with airliners or Apple does with cell phones, tablets or any of its exclusive products,” says Dommisse.
It is important to note that the franchised dealers’ standards include significant technical training, staff welfare, pension and insurance benefits, extremely expensive special tools (calibration machines, diagnostics etc.), specific detail of facilities (special flooring etc.), CI upgrades, higher than legislated minimum wage, skills development levies, injury protocol and healthcare benefits.
“We want to build our competition but it’s not reasonable to do it immediately. Our businesses have to meet global manufacturer standards which, on average, take many years to establish a return on investment on meeting these standards. Our level of investment is mandatory. We therefore support opening the market slowly and responsibly. There are no defined standards in the code yet. These need to be developed appropriately, and here we can help,” says Dommisse.
“In general, we agree with the principles noted throughout the code. It is the application and machinations of it that we object to. The changes made to draft 2 of the code have not taken on board the submissions made by NADA to the first draft,” he adds.
“In order for the automotive industry to continue to contribute positively and sustainably to the South African economy, all stakeholders need to engage, discuss and constructively develop a meaningful and sustainable new Code of Conduct,” concludes Dommisse.