Big changes to car sales and services in South Africa come into effect from July

The Competition Commission has published its guidelines for South Africa’s automotive aftermarket which aim to promote more competition around motoring issues such as manufacturing, repairs, insurance, and financing.

The guidelines have also been developed specifically to promote economic access, inclusion and greater spread of ownership for historically disadvantaged individuals.

The commission said that these guidelines will be effective from 1 July 2021. Below are the biggest changes included in the guidelines, and how they will impact the motoring industry and drivers.

Bundling

In South Africa, when consumers buy a new vehicle, they are typically sold a maintenance plan and/or service plan, included in the purchase price of the vehicle.

Most consumers are unaware that the purchase price of the vehicle is bundled with these value-added products.

The commission said that this bundling may make the purchasing of these plans easier for some customers who would otherwise have to seek these out separately.

However, it noted that some customers can, and do purchase these value-added products outside of the standard manufacturer’s provided plan from other third-party suppliers.

The guidelines therefore provide for the unbundling of maintenance plans and service plans at the point of sale from the purchase price of the vehicle.

It will also be mandatory for dealers to disclose to customers the price of the vehicle and the price of the value-added products separately before the sale.

Transfer of maintenance and service plans

Manufacturers and other providers must transfer a maintenance plan and/or a service plan to a replacement vehicle in the event where the original vehicle is written off by the insurer.

Where there is no replacement vehicle after a write-off or it is not feasible to transfer a maintenance plan and/or a service plan to a replacement vehicle, the consumer shall be afforded the right to cancel the Value-Added contract and/or receive a refund of the value of the balance of the product.

This is to prevent the consumer from being out of pocket as they cannot benefit from a plan while having no vehicle.

Parts

The commission noted issues where it was difficult for independent repair shops to obtain approved/original spare parts from manufacturers.

This also potentially deprives consumers from shopping around and potentially getting a cheaper deal on their repairs.

To address this, the commission said that manufacturers and approved dealers should make original spare parts available to independent repairers to perform service, maintenance or repair work.

It added that independent repairers cannot be restricted from accessing parts in any way, and that the only parts which can have conditions attached are those that deal with the security systems of a vehicle.

Sensitive information and price co-ordination

The commission said it is concerned about the exchange of commercially sensitive information between sellers that sell new vehicles and products of competing manufacturers, especially in the case of multi-brand dealerships.

The guidelines state that dealers that sell products of competing manufacturers must ensure that no commercially sensitive information (including information stored in the cloud) is provided or shared with competing manufacturers.

Approved dealers that sell new motor vehicles and products of competing manufacturers must also ensure that they do not engage in price co-ordination.

Specifically, the prices of competing motor vehicles and products must be determined by different individuals within the dealership.

• Business Tech Staff Writer, 1 February 2021