July will usher in big changes for car sales and services in SA

There are changes on the automotive industry’s horizon, and they will affect every South African looking to buy, repair and service a car.

The changes, effective July 1 2021, are coming about thanks to guidelines published by the Competition Commission.

According to George Mienie, CEO of AutoTrader, the guidelines will introduce substantial changes to car buying and servicing processes.

“These changes will mean original equipment manufacturers (OEMs), dealerships and workshops will have to alter the way they do business in the future,” he said.

What are the changes and how will they impact the OEMs, dealerships, workshops and,  most importantly, the consumer?

Here are some of the most important guidelines and their implications.

1. Freedom of choice

Consumers who do not have insurance cover may repair their motor vehicles at a service provider of their choice at any point during the motor vehicle’s lifespan. They no longer  have to go to an “approved motor body repairer”.

2. More options

Consumers’ options when it comes to motor body repairers have been limited. This won’t be the case in the future. The OEMs need to promote and/or support the entry of new motor body repairers, with a preference for firms owned by historically disadvantaged individuals (HDIs).

The OEMs cannot enter into exclusive arrangements, either with one or more approved motor body repairers, for effecting repairs on an OEM’s motor vehicles within a designated geographic area. Practically, this should mean there are more motor body repairers and the consumer has more options. In theory, cars should also be repaired faster. 

3. More flexibility with maintenance and service plans

Dealers won’t be able to include a maintenance or service plan in the purchase price of a vehicle; the plan has to be “unbundled”. Practically, this means the consumer can say yes or no to buying a plan from a dealership. He or she is free to shop for one elsewhere. In addition, if a vehicle with a maintenance or service plan is written off by an insurance company, that plan must pass on to the replacement vehicle.

4. Dealerships will become less grandiose

The commission said dealership start-up costs, at an average of R60m, can be exorbitant and a high barrier to entry. In future, the OEMs will need to adopt measures to lower financial barriers to entry and promote the participation of HDIs in the dealership market. In addition, OEMs should not impose  “onerous obligations” on prospective dealers. Expect a lot more smaller, far less grandiose dealerships to pop up.