Johannesburg, 11 December 2020 – Restrictive service and repair warranty plans will finally become a thing of the past for South African car owners, following a major announcement by the Competition Commission today.
Currently, owners of new cars in South Africa are typically locked into using a vehicle manufacturer’s service centres, repair shops and parts in ‘embedded’ motor and service plans. If these owners use an independent service or repair provider of their own choice, vehicle manufacturers unfairly void their warranties.
But on Friday, 11 December 2020; the Commission made public its finalised set of guidelines for the automotive aftermarket that will undo these types of practices in South Africa.
These guidelines — which will be put into effect on 1 July 2021 — include several sweeping changes that will boost competition while creating new opportunities for emerging, independent providers. All of these changes mark a major victory for consumers, SMEs and transformation.
Key changes announced include the following, as indicated by the Commission’s final published guidelines:
- That car manufacturers (know as Original Equipment Manufacturers) must recognise and not obstruct a consumer’s choice to seek service, maintenance, and mechanical repair work for their motor vehicles at a service provider of their choice, regardless of whether that service provider is an approved dealer or an ISP (Independent Service Provider)
- There will be the unbundling of maintenance plans and service plans at the point of sale from the purchase price of the motor vehicle. This will allow consumers to exercise choice regarding whether to purchase the maintenance plan or service plan and will make servicing a more affordable option for South Africans, whilst allowing for more players to provide such value-added products for consumers whose motor vehicles are in-warranty
- OEMs must adopt measures to promote and/or support the entry of new motor-body Repairers, with a preference for firms owned by Historically Disadvantaged Individuals (HDIs)
- Consumers can fit original or non-original spare parts, at a service provider of their choice, whether an approved dealer, approved motor-body repairer, or an ISP, during the in-warranty period. But the quality of these will be carefully dealt with in line with consumer protection laws as well as existing warranties
The 39-page document outlines other major changes that include ensuring a lower barrier of entry for new dealerships, particularly in townships and rural areas. Other changes include ensuring that insurers offer consumers more choice of repairers within geographic areas for out-of-warranty repairs. The final guidelines are available on the Competition Commission website (click here to see more).
Responding to the final guidelines, Autoboys CEO, Filum Ho, says: “Following consultations that started widely in the industry in 2017, these final guidelines mark a major victory for consumers and our industry in South Africa.”
“By carrying out initiatives such as unbundling the service and repair warranty market, we can expect better competition in the market, greater transformation, access, and freedom of choice. The measures to ensure greater inclusivity in the market, from the likes of independent and previously disadvantage repair and service providers, will also go a long way in boosting transformation and access while creating new job opportunities.”
Ho adds: “We believe that strong guidelines are needed to unlock greater opportunities for SMEs in our sector and help generate economic growth. Global institutions such as World Bank have regularly cited that highly concentrated, uncompetitive sectors are a big reason for sluggish growth in South Africa. At a time when our country is emerging — and still dealing with — the impact of the coronavirus pandemic, this must change for us to break free from our status as the world’s most economically unequal country.”