Power imbalance between car dealers and manufacturers in review

Automotive dealers are calling on the federal government to step in to address a power imbalance between large car manufacturers and independent auto retailers amid concern businesses are resorting to desperate measures to stay afloat.

The current agreement means manufacturers can impose contract terms and set dealership expectations to their own advantage. The pressure this creates on dealers impacts on business and can affect how cars are serviced, repaired, and how warranty claims are handled.

Dealerships have reportedly had their dealer agreements ended with little notice and received raw deals on returns of faulty cars.

Many have resorted to making up sales to make thresholds for manufacturer incentive payments. This practice, known as the cyber-cars phenomena, has even attracted Australian Competition and Consumer Commission (ACCC) scrutiny recently.

A new code of conduct proposal has been released to allow franchisees to collectively bargain with their franchisor regardless of their size or other characteristics.

The Australian Automotive Dealer Association (AADA) and the ACCC will work together to help develop the details to ensure the best possible outcome for new car dealers.

The new code aims to enforce fairer contracts between the manufacturer and the dealer in the automotive industry. The independent code will create a set of rules that both the manufacturers and dealers must observe when establishing expectations around dealer conduct.

These changes could mean vehicle dealers see more transparent sales target setting and better conditions for terminated dealers, including longer notice periods and stock-buyback arrangements, included in the code.

The ACCC is set to bring out a draft legislative instrument in the next couple of months and will be up for public consultation. If you wish to have more of a say on how this exemption will work, the AADA or the ACCC would both be acceptable avenues to have your opinion.

If you would like to speak to us about how it could impact you please call us on 03 5443 0344 to speak to one of our automotive industry experts.