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Dealers call for franchising code of conduct

Unique environment: Automotive retailers need their own franchise, industry leaders say.

AAIA lobbies for stand-alone franchising code of conduct to protect car dealers

General News logo17 Aug 2010

THE Australian Automotive Industry Association (AAIA) has called for an automotive franchising code of conduct to protect car dealers.

The new national body, formed to represent Australia’s retail automotive industry, says the unique circumstances of car dealers should require vehicle manufacturers, importers and distributors to be bound by specific new code of conduct.

AAIA acting CEO David Purchase said a stand-alone ‘Motor Vehicle Franchising Code of Conduct’ should be developed and enacted to enable dealer principals to "confidently invest in their business".

“Dealerships are totally and utterly dependant on the factories or distributors for their business, supply of vehicles and parts,” he said.

“Franchise agreements typically provide for a three to five-year tenure and are, in almost all instances, presented on a ‘take it or leave it’ non-negotiable basis.”

 center imageLeft: AAIA acting CEO David Purchase.

The AAIA said the next federal government must recognise the unique circumstances of the retail automotive sector to address a range of concerns from car dealers, including the ability of a distributor to effect unilateral changes to franchise agreements before they expire.

An automotive franchise code of conduct should also prevent the use of unrealistic sales targets (or key performance indicators) as discipline, said Mr Purchase, as well as reduce indirect pressure on dealers not to ‘diversify’ and take on other brands, in which case multi-franchise dealerships are forced to establish stand-alone premises.

According to the AAIA, dealers are also forced to order and carry stock levels and model mixtures that may not suit that business. It says distributors bundle fast and slow moving stock together and that in order for a dealer to obtain the faster moving stock they must accept slower stock.

“Retailing motor vehicles is not comparable to selling pizzas, coffees or hamburgers. Motor dealerships are unique to virtually all other businesses, certainly unique to all other franchise models,” said Mr Purchase.

“The investment required to operate a dealership is immense - typically in excess of $10 million, plus millions of dollars of stock must be carried. The value of this investment is totally dependent on the franchise agreement.”

Mr Purchase said a motor franchise agreement code of conduct would benefit both dealers and their customers.

“AAIA is not saying motor vehicle dealerships are better than other franchisees and therefore deserve special treatment,” he said.

“This is about addressing specific issues in the automotive sector that are a sensible and logical step towards improving the working environment, and ultimately, providing motorists with more choice and better options.”

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