The Competition Commission put the right to repair in the automotive body shop business into immediate focus recently. Complaints leveled at monopolistic tendencies that operate within the South African collision repair trade formed a huge day at a recent workshop that the Competition Commission held in Pretoria. Stakeholders from OEMs, insurance companies and delegations from SAARSA as well the South African Auto Repair and Salvage Association attended.
The APMMA African Panelbeaters and Motor Mechanics Association, CRA Collision Repair Association and the RMI represented a major push on the Right to Repair. The claim has been made that it is almost impossible for small previously disadvantaged owner-operators to remain in business because of wholesale work steering coming from insurance panels of approved repairers and manufacturer approvals. These activities are close to criminal of salvage and work distribution stakeholders who have gained a quasi-monopoly in some major city operations throughout the country when dealing with non-drivable vehicle repairs.
Vivian Pearson, from the South African Insurance Association (SAIA), presented her now normal overview of what insurers were doing to improve access to the automotive aftermarket within the bands of the financial charter which they all operate in. This did not really address the raft of exclusionary business practices being set up and constantly changed by insurance companies involved in the micro-management of their motor books. With just 35%, and the number is decreasing, of motorists being able to carry an insurance policy, the insurance business is beset with many problems of their own.
Len Smith then took on all the major culprits of the current market in body shop repair and their inability in many cases to include black owned or single “Ma and Pa” repair shops. In his words he said that the business had moved from an no-approvals market of the 1990’s to a huge “white boys club” that operate in an almost criminal manner to exclude his SAARSA membership from obtaining work in a normal free enterprise manner. “We’re now tired of the all and sundry insurance companies and motor manufacturers telling us what we can and can’t repair”.
“Right now this market is being monopolised by just three people being able to tow to their yards and distribute to the best work to their own repair body shops, while single operators are more than often than not left to pick up the crumbs in non-structural repairs (drivable vehicles).” he concluded.
Magazine publisher Ian Groat said that the current average labour rate being forcefully laid down because of insurance dominance across the country is approximately R250 to R300 per hour, while mechanical labour rates were in many cases double that at R600 per hour. Insurers collectively should be ashamed of that. It is a total disgrace when viewed against the huge need for investment to keep up with the connected car technology and the tsunami of learning how to keep pace with the repair of tomorrows car.
Also, the current write-off rates of approximately 46% of value was unsustainable in South Africa as only insurers seem to win. In some cases it appears they are receiving up to 30% of the vehicle selling price at salvage auctions in the form of kick backs. This coupled to the practice of insurers only making a reported 5% profit on their motor book is absolutely without foundation when viewed against the fact that it is estimated that only 6-8% of insured drivers on average claim per year on their policies. This makes roughly a 90% profit plus profit on their risk management profiles on motor insurance between accountants factoring in theft, hi-jacking and their overhead numbers to reduce the overall profit to almost nothing.
Manufacturers were singled out for malpractice from trade accounts. Hyundai SA seem to operate on exclusionary practices of not supplying spares to a non-approved repair shop. Toyota SA also seem to be operating a very closed shop approach on thier appointment of approved repair centres. VWSA, now want their repair centres to install a multi-mix body repair centre, while the cost of this is in excess of R1 million has to be born by the approved body shop. All this while less than 3% of vehicles on South African roads contain the newer type of aluminium, carbon fibre and high strength steel constructions. Within full view of consumer protection, the Competition Commission has been for the last three years investigating many and varied market practices from motor manufacturers and insurance companies.
Hardin Ratshisusu, chairperson from the Competition Commission, said that the full force of their investigative personell will now actively pursue these matters for formerly disadvantaged repair entities and single owned body shops across the colour line to introduce, either by a voluntary or regulatory basis in future developments, in a much more fairer manner.
The right to repair drive must rid the industry of all exclusionary market manipulations and work steering from insurers to enable a decisive change in free enterprise conditions. This could start within say a six month period for motor manufacturers and insurers who are often key role players to change their policies in a way much the same as the Australian and Russian markets do.
They have recently been able to achieve a much more equitable solution for all. The Commission has huge power at its disposal to get remedies to the current state of the automotive aftermarket supply market and they won’t stop to use these powers in the collision repair aftermarket.