AADA ACHIEVES MOMENTOUS FRANCHISING REFORMS
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OFFICIAL PUBLICATION OF AADA | APRIL 2021 | ISSUE 34
AADA ACHIEVES MOMENTOUS
FRANCHISING REFORMS
CAR BUYERS STILL FAVOUR DEALER MODEL: SURVEY
THE YEAR OF REFORM FOR THE AUTOMOTIVE INDUSTRY
AADA CONVENTION 2021: ONSITE, LIVE AND ON-DEMAND
www.automotivedealer.com.au PRINT POST 100019106
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WELCOME Australian Automotive Dealer Association
CONTENTS ISSUE 34 | APRIL 2021
WELCOME
From The AADA Chairman..................................................................................................... 4
From The AADA CEO.............................................................................................................. 4
CONTACT AADA
PO Box 4409, POLICY
Kingston ACT 2604
AADA Achieves Momentous Franchising Reforms............................................................. 5
CONTACT AUTOMOTIVE DEALER
936B Glenhuntly Rd, Senate Committee Urges ACCC To Expedite Holden Probe.............................................. 7
Caulfield South, VIC 3162
Service And Repair Sharing Legislation Introduced............................................................ 8
Issue No. 34 | APRIL 2021
PUBLISHER: AADA Car Buyers Still Favour Dealer Model: Survey..................................................................... 9
MANAGING EDITOR: Luke Prendergast
ASIC Releases Deferred Sales Model Guide...................................................................... 12
PRODUCTION MANAGER: Stace Agombar
CREATIVE DIRECTOR: Nick Murphy
The Year Of Reform For The Automotive Industry............................................................. 13
ADVERTISING MANAGER: Geoff Vine Government Reforms Drive Dealers Towards A Fairer Future....................................... 14
geoff@automotivedealer.com.au
Mobile: 0408 189 295 AADA 2021 CONVENTION: ONSITE, LIVE AND ON-DEMAND
Phone (03) 9576 9944 | Fax (03) 9576 7277
Join Us In Brisbane For AADA2021 Future Focused......................................................... 21
AUTOMOTIVE DEALER
DELIVERY/CHANGE OF ADDRESS Meet Your New Convention Host David Speers................................................................. 22
(03) 9576 9944 or
editor@automotivedealer.com.au Dealership Of Tomorrow Update......................................................................................... 23
EDITORIAL
editor@automotivedealer.com.au
Build Your Millennial Workforce With Jared Hamilton..................................................... 23
EDITORIAL & ADVERTISING OFFICE Deloitte’s Industry Overview & Economic Outlook............................................................ 24
936B Glenhuntly Rd,
Caulfield South, VIC 3162 Service Management Structures That Increase Returns................................................. 24
Be Part Of Our Onsite And Virtual Expo And Workshops.................................................. 25
FEATURES
Digital Focus Of NADA Show................................................................................................ 16
No responsibility is accepted by the publisher
for the accuracy of information contained Dealership Of Tomorrow (DOT): 2021 Update.................................................................... 18
in advertisements in the Automotive Dealer
magazine. Publication of any advertisement does
not constitute endorsement by the publisher Deloitte Releases Consumer Study Findings..................................................................... 27
of any product, nor warrant its suitability.
Advertisements are published as submitted by
advertisers. “I Shall Be Released..."......................................................................................................... 29
COPYRIGHT
No part of this magazine may be reproduced Your Service Department In 2030........................................................................................ 32
without the publisher’s written permission.
CONTRIBUTORS How Close Are We To ‘Click And Buy’?............................................................................... 34
The views expressed in Automotive Dealer by
external contributors and advertisers are not
necessarily those of AADA.
Do We Need A Motor Show?................................................................................................ 35
Use The Football Playbook To Run A Great Dealership.................................................... 37
AUSTRALIAN
@AADA_ASN AUTOMOTIVE DEALER
ASSOCIATION Convenience Is King – And Today That Literally Means At The Touch Of A Finger........ 39
WE’D LIKE TO HEAR FROM YOU.
We’d like to hear from you about what’s been supporting junior sporting clubs or sponsoring a It’s a pity that the community work being done
happening at your dealership that you think charity event. by Dealers is a well-kept secret. We intend to
could be worth passing on to our readers. change that. AADA is determined to generate a
We would like to know.
greater respect for new car franchise Dealers
It can be anything from a unique sale, a fleet
Whatever the story you have, it will be good as compassionate business people. Part of our
deal or a story about a member of your staff who
reading. Send us the information and key strategy is to remind the media, politicians and
recently accomplished a notable feat.
contact details and we will follow it up. If you opinion makers that, by employing over 66,000
It could be a ‘feel good’ community initiative have photographs of the endeavour so much people, AADA members make a substantial
you have undertaken involving local schools, the better. contribution to the Australian economy.
WELCOME Australian Automotive Dealer Association
FROM THE AADA CHAIRMAN
Terry Keating
AADA Chairman
W
hen David Blackhall stepped into After four long years, unimaginable We expect all current agreements on foot as
the role of CEO of AADA in 2016, roadblocks, and in some cases disingenuous at 30 June 2021 will be covered by the new
he worked with the Board to map support, we have had a code of principles regulations.
out a plan to address our greatest weakness as announced by our Prime Minister and the new
automotive Dealers, that was our lack of scale Minister who took control of the particular Sadly, of course, this all came too late for nearly
against the power of some recalcitrant auto ministerial portfolio just a few weeks ago, the 200 Holden Dealers and their staff. However,
makers. Hon Michaela Cash. this Code should ensure that if a Holden Mark
II occurs in the future, reasonable protections
It seemed at the time a reasonable proposition The Code is mandatory, embraces any are mandated.
that poor behaviour on both sides should arrangements which seek to circumvent the
be subject to redress. Internally, we felt that Code (e.g. the so-called agency model), carries On behalf of all of our members I congratulate
if we achieved nothing else we had to have heavy penalties for non-compliance and will our Secretariat, both current and past
an insurance policy for dealership balance become law on 1 July this year. members on achieving this outcome.
sheets, most of which have been built up over
Well may we say on 1 July - ‘Happy New Year’.
decades. Our blueprint for a code required that
outcome.
FROM THE AADA CEO
James Voortman
AADA CEO
O
n 12 March the Prime Minister made It’s worth making special mention of the Dealer councils. Some put in submissions,
an incredibly important announcement AADA Board who about four years ago (well came to Canberra to visit Ministers or
for new car Dealers across Australia. before the Holden withdrawal and the moves participated in Senate inquiries. Members
The announcement centred around the by Mercedes and Honda to agency) directed from large, medium and small dealerships all
franchising protections Dealers had been the secretariat to make this the number one played their part. Members from our capital
calling for over many years, but particularly advocacy priority. We also need to mention cities and our country towns got stuck in.
over the past five years. my predecessor David Blackhall who took the
initial lead on pursuing this matter and used It was a combined effort by so many.
The details of the announcement can be his exceptional skills of persuasion to put this
examined in more detail here, but in a nutshell In the end the message got through to the
squarely on the agenda of both major parties
they represent the most important regulatory decision makers in Canberra. Our industry
and the ACCC.
changes affecting the relationship between and the social and economic contribution
Dealers and OEMs. Most importantly though I need to it makes is valued. We should fight hard
acknowledge the Dealers who took the time to for fairness for this industry and the many
The fact that they were announced by our fight for their industry. Some spoke or wrote Australians that make their living through it.
Prime Minister is a testament to the value to their local members of Parliament. Some
the Government places on our part of the contributed through their membership on
industry. These changes are the result of hard
work by many people.
4 | APRIL 2021 | automotivedealer.com.au
POLICY Australian Automotive Dealer Association
AADA ACHIEVES MOMENTOUS
FRANCHISING REFORMS
A
ADA welcomes the Morrison The AADA and Dealer members have been changes to business practice by explicitly
Government’s landmark reforms to working for several years on regulations which recognising that Dealers operating as a
the automotive franchising landscape. compel Manufacturers to treat Dealers fairly, Manufacturer’s Agent in relation to new
On 12 March, the Government announced provide a system for mandatory and binding vehicle sales are still protected by the
momentous reforms for the automotive arbitration and appropriately penalise those Franchising Code; and
industry, which will protect Dealers against Manufacturers who fail to comply.
the worst abuses by some car companies and • appropriate fines. Increase available
bring a degree of balance to the relationships These new regulations are a welcome response penalties under the Franchising
between Dealers and Manufacturers. by outgoing Minister for Employment, Skills, Code to up to $10 million. This
Small and Family Business, Michaelia Cash, will strengthen penalties for wilful,
AADA CEO James Voortman said the and the Australian Government. Dealers, their egregious and systemic breaches of the
announcement would be welcomed by employees, and all of those other businesses Franchising Code by large and profitable
automotive Dealers and their 60,000 who depend on dealerships for their welfare multinational companies.
employees all across Australia. can now have confidence that they are
protected from the devastating effects of those The Government will also explore the merits
“These changes will bring a degree of balance Manufacturers who seek to exploit their power of a stand-alone Automotive code of conduct
to the relationships between new car Dealers and size advantage at the expense of their and mandatory binding arbitration provisions
and the Manufacturers to which they are franchisees. within this new code, similar to those in
franchised. The reforms are sensible and fair the Media Bargaining Code, which were
and will bring all Manufacturers up to the These changes include: developed to curtail the power of the Big Tech
standard already being employed by ethically- platforms.
minded car brands operating in Australia,” he • mandatory principles for new Dealer
said. agreements. Establish best practice In a letter to Dealers, Senator Cash said the
by transforming existing voluntary Australian Government was committed to
“Mandating the principles for new Dealer principles into mandatory obligations delivering practical reforms for Australia’s
agreements, ensuring agency agreements under the Franchising Code. This automotive sector.
are captured by these regulations and will address concerns multi-national
setting appropriate fines for breaches of manufacturers won’t follow voluntary “As many of you would be aware, my office
the Franchising Code are all very welcome principles; has recently held a number of round-tables
measures. Only Manufacturers who ride and discussions with Australia’s automotive
roughshod over Australian Dealers will • ensure Agency agreements are captured Dealers. We have heard the calls for stronger
have anything to fear from what has been by franchising regulations. Ensure that government action, and are making some
announced.” the Franchising Code keeps pace with significant changes in response,” she wrote.
automotivedealer.com.au | APRIL 2021 | 5
POLICY Australian Automotive Dealer Association
“The best practice principles that the strengthening dispute resolution and turnover of $10 million or less;
government released on 11 December 2020 as increasing penalties to deter poor conduct in • removing the contract value threshold,
a voluntary set of guidance measures will be the sector,” Senator Cash wrote. which will apply the protections to more
transformed into mandatory obligations under contracts; and
the Code. These will assist in providing clarity “In addition, the Government is committed
to working further with the automotive • providing more flexible remedies to a
on compensation payable in the event that a
franchising sector. The Government will court when it declares a contract term
manufacturer decides to withdraw or change
consider a new mandatory stand-alone unfair.
business model part way in the future through
the term of an agreement. automotive code and will consult the sector
Mr Voortman said AADA looked forward to
further on this in coming months. The
participating in the further work flagged by
“The Government will also ensure that the Government will also explore mandatory
the Government on the merits of a standalone
Franchising Code keeps pace with changes to binding arbitration provisions within this new
automotive code, binding arbitration and
business practice by explicitly recognising that code, similar to those in the Media Bargaining
unfair contract terms.
Dealers operating as a manufacturer’s agent in Code, which were developed to curtail the
relation to new vehicle sales are still protected power of the Big Tech platforms.” “It has been a difficult 12 months for
by the Franchising Code.” automotive Dealers with General Motors’
The ACCC announced on 22 October 2020, a
termination of 185 Holden Dealers and
Senator Cash said she expected the changes change to collective bargaining requirements
significant changes flagged by a number
would be implemented by the middle of this to allow franchisees to collectively negotiate
of other Manufacturers. The industry is in
year, and would build on the automotive with their franchisors without first having
a state of rapid change and all Dealers ask
specific provisions of the mandatory to seek ACCC approval. By joining together,
is that major changes see Manufacturers
Franchising Code that took effect on 1 June small Dealers may have a better opportunity to
engage in a fair process and provide adequate
2020. have input into negotiations than if they were
compensation,” he said.
to negotiate on their own. These are being
These previous reforms included: increasing presently worked through the Parliament. “Dealers in regional towns and cities all across
End of Term notification periods; improving
the country will be thanking the Morrison
transparency for capital expenditure On 6 November 2020, the Legislative and
Government. In particular we would like to
requirements; and clarifying options for Governance Forum on Consumer Affairs
thank the outgoing Minister for Employment,
dispute resolution. These changes, which agreed on changes to strengthen protections
Skills, Small and Family Business and new
were the first time that a sector-specific part against Unfair Contract Terms (UCTs) in the
Attorney General, Michaelia Cash, for sticking
of regulations have been included in the Australian Consumer Law, including:
up for Australia’s Dealers and working closely
Franchising Code, provided the foundation for • making UCTs unlawful and giving with the industry.”
the most recent announcements. courts and tribunals the power to impose
civil penalties; The AADA encourages members to write
“The new commitments also build on the
• changing the definition of a ‘small to the key members of the Morrison
Government’s response to the Parliamentary
business contract’ by increasing the Government, thanking them for these reforms.
Fairness in Franchising report, which included
threshold to less than 100 employees and We will provide members with further detail
improvements to disclosure requirements,
using either this or a business’ annual as the changes occur.
preventing retrospective contract variation,
6 | APRIL 2021 | automotivedealer.com.au
POLICY Australian Automotive Dealer Association
SENATE COMMITTEE URGES ACCC TO EXPEDITE
HOLDEN PROBE
T
he Senate Committee for Education arbitration to resolve disputes a degree of balance to these relationships,”
and Employment has urged the during contracted negotiation in the Mr Voortman said.
Australian Competition and automotive industry which are not
Consumer Commission (ACCC) to able to be resolved by other dispute “The Inquiry has made a number of
expedite its investigations into the resolution mechanisms. sensible and fair recommendations
behaviour and actions of GM Holden. which will set an appropriate standard
• That the Australian Government for Manufacturers in their commercial
On 19 March, the Committee released its appoint a senior officer in the Office relationships with Dealers. Australian
final report into the Relationship Between of the Australian Small Business and car Dealers desperately want strong
Car Manufacturers and Car Dealers Family Enterprise Ombudsman to and respectful relationships with their
in Australia, making a total of seven investigate and coordinate dispute Manufacturers, but they also need
recommendations. resolution investigations and facilitate assurances that the massive investments
mediation and arbitration arising they have been required to make will be
The Committee said the ACCC should from the transformation of the protected.
commit to providing regular public updates voluntary best practice principles into
on the Holden investigation and similar mandatory obligations. “We sincerely hope that this Inquiry,
investigations into the relationship between its recommendations and the reforms
Manufacturers and Dealers in the future. • That the Australian Government announced by the Prime Minister and
undertake a review into effectively outgoing Minister for Small and Family
It also recommended that the ACCC enforcing alleged contraventions of Business, Michaelia Cash, will foster
proactively ensured that General Motors the Competition and Consumer Act better relations between Dealers and all
Australia and New Zealand was meeting 2010 as it relates to the regulation Manufacturers.”
its Australian Consumer Law obligations of the relationship between car
to Holden vehicle owners in relation to Manufacturers and car Dealers. On behalf of the retail automotive industry,
warranty and recalls, technical support and Mr Voortman commended both sides of
access to parts. The inquiry was a comprehensive review Parliament for coming together to launch
into Manufacturer/Dealer relations the Inquiry.
The other recommendations were: and received over 70 submissions from
interested parties as well as hearing public “It is so important that we have managed
• That the Australian Government testimonies from several franchised new to reach a bi-partisan report and we
prioritise the new automotive car Dealers. would like to extend a special thanks the
reforms announced on 12 March Committee Chair Senator Louise Pratt, as
2021 and implement the increased The inquiry proved to be a very important well as the work done by Senator Deborah
fines, mandatory principles and platform from which the AADA and O’Neill and Senator James McGrath,” he
protection of Dealers operating as a Dealers were able to demonstrate the said.
Manufacturer's agent by 1 July 2021. effects of the power imbalance that exists
between Manufacturers and Dealers. “We would also like to thank the Morrison
• That the mandatory best practice Government for listening to Dealers and
principles include a provision for the AADA CEO James Voortman welcomed their concerns and announcing landmark
reimbursement for all reasonable the bi-partisan report, which was the result reforms. It is also important to thank all
expenses incurred in relation to of an Inquiry that ran over 12 months and of the Dealers who participated in this
warranty and recall work, including shone a light onto serious issues within process. Speaking out is never easy due to
expenses associated with diagnosis, the industry following General Motors’ the potential for retribution. A number
administration of claims and claim withdrawal of Holden from Australia. of Dealers appeared publicly, delivering
audits. powerful and heart felt accounts. Dozens
“This Inquiry has reaffirmed the existence more lodged confidential submissions.”
• That the Australian Government of a power imbalance between car
introduce mandatory binding Manufacturers and the Dealers and made The full report is available for download
a number of recommendations to provide from the Senate Inquiry’s website.
automotivedealer.com.au | APRIL 2021 | 7
POLICY Australian Automotive Dealer Association
SERVICE AND REPAIR SHARING LEGISLATION
INTRODUCED
O
n 24 March, the Morrison Government for their customers and are suitably qualified “Currently, around one in ten vehicles taken
introduced legislation into the should be entitled to compete with Dealers on to repair workshops in Australia are affected
Parliament to establish a mandatory fair and reasonable grounds and this legislation by a lack of access to service and repair
scheme for the sharing of motor vehicle will give them the chance to do that.” information. In Europe and the United States,
service and repair information. similar schemes are delivering lower repair
The scheme is due to come into effect on 1 July and maintenance costs for consumers.”
The scheme will, for the first time, require car 2022 and work on the underlying rules will
Manufacturers to make information about commence soon. The legislation foreshadows Mr Sukkar said the Government recognised
service and repair of their vehicles available the appointment of a scheme adviser who the important role industry would play in
for purchase by independent repairers and will oversee operations and report back to ensuring the success and effectiveness of the
registered training organisations at a fair Government on progress and if necessary, scheme. It was the Government’s intent to
market price. work with the ACCC to enforce scheme rules confer the adviser role on a joint industry-
and manage any disputes that may arise. led organisation that will have the technical
AADA CEO James Voortman welcomed the expertise, experience and relationships within
news and said AADA would continue to work The scheme has been in development for many the automotive industry to support the
with the Government and Industry on the years and the legislation is the culmination of scheme.
important underlying detail. a lengthy consultation and negotiation process
between the AADA, other peak automotive “We all want the same thing – consumers to
“Dealers recognise that independent repairers industry associations and the Government. be able to access servicing and repairs in a
have an important role to play in servicing and fair, competitive market, and we’re working
repairing the tens of millions of motor vehicles One of the central principles of the scheme is with the five peak bodies and other industry
on our roads,” he said. that information is shared on commercially representatives to make it happen.” Mr Sukkar
fair and reasonable terms. AADA is supportive said.
“This information will be shared on fair and of the legislation, which adheres to this
reasonable commercial terms and sensitive commitment and sets restrictions on sensitive Subject to passage of the legislation through
information will only be made available to information regarding safety and security. the Parliament, the scheme will come into
suitably vetted and qualified technicians. effect on 1 July 2022.
Assistant Treasurer Michael Sukkar said
“Franchised Dealers take great pride in Australia needed a strong service and repair The AADA will continue to work with
the quality of service they provide to their industry to keep the nation’s 19.8 million the Government and other associations to
customers. Dealers make huge investments in vehicles on the road. structure the scheme such that it meets its
factory training of their qualified technicians intent and treats all businesses involved in
along with having the latest tools, equipment “There are nearly 35,000 automotive service automotive repairs fairly and equitably.
and facilities. Independent repairers who and repair businesses in Australia, employing
choose to commit to similar levels investment over 106,000 Australians,” he said.
POLICY Australian Automotive Dealer Association
CAR BUYERS STILL
FAVOUR DEALER MODEL:
SURVEY
N
ew car buyers still overwhelmingly Key Findings with 52% of those suggested that such a model
favour interacting with Dealers, and would lead to higher prices for new cars in
• 94% are confident in the process of
are confident in the process of finding the market. Consumers noted the simplicity
finding and buying a new car;
and buying a new car, according to new and potential ‘fairness’ of the agency model,
research undertaken on behalf of the AADA. • 87% are confident in interacting with a although there was a high level of concern that
new car Dealer; and this would drive prices up.
Zing! Insights conducted an online survey of
500 Australian new car buyers/intenders in • 90% say that the ability to negotiate price Confidence in Car Buying Process
order to gain an insight into the perspectives of a vehicle is ‘very or quite’ important to
and preferences of the new car market them in context of the purchase process In total, 94% of the new car market claimed
consumer, with relation to interacting with overall. that, when it came to navigating the purchase
new car Dealers. process and finding the best car for their
The report concluded that consumers like the needs, they were ‘very’ or ‘quite’ confident.
The research sought to canvas views of chance to ‘get the best price’ and the ability At the other end of the scale, just 1%
Australian new car buyers and intenders across to negotiate can empower them. The sense suggested that they were ‘not very confident’,
some particular areas relating to their vehicle was that there should ‘always be room’ for suggesting the car buying process is familiar
purchase behaviours, including: negotiation. and considered easily navigable for the vast
majority of consumers.
• confidence in participating in the new
car purchase process and specifically Reflecting levels of confidence in the overall
interacting with Dealers; new car buying process, very high proportions
• priorities in the vehicle purchase process; of the new car market say that they are either
‘very’ or ‘quite’ confident in interacting with
• perspectives on the manufacturer-driven new car Dealers (87%). Just 2% suggest that
agency model and perceived fit for the they’re ‘not very confident’. From this, it’s clear
market; and that the new car Dealer experience isn’t seen as
• testing planned engagement with electric a significant barrier to purchasing a vehicle.
vehicles/hybrid vehicles, and measuring
In total, 13% of the new car market rate their
barriers to engagement.
confidence as either ‘neutral’ or say they’re
94%
The goal of this research was to assist the not very confident with interacting with new
CONFIDENT IN CAR
AADA with understanding the current needs BUYING PROCESS car Dealers. While not statistically significant,
and priorities of the new car market buyer, and women are slightly more likely than men to
specifically to understand the potential impact be less confident in interacting with new car
on consumers of the agency model of buying a A significant proportion (32%) found the idea Dealers. Overall, no particular demographic
vehicle (as opposed to a Dealer-led model). of no longer being able to negotiate on price stands out as being significantly less confident
to be unappealing (30% found it appealing), than others, highlighting that experiences with
Dealers are generally consistent.
automotivedealer.com.au | APRIL 2021 | 9
POLICY Australian Automotive Dealer Association
FACTORS RATED AS IMPORTANT WHEN BUYING A CAR...
FACTORS RATED AS IMPORTANT WHEN BUYING A CAR...
TEST DRIVE NEGOTIATE NEGOTIATE ADVICE BY
PRICE ADD-ONS SALES STAFF
TEST DRIVE NEGOTIATE NEGOTIATE ADVICE BY
PRICE ADD-ONS SALES STAFF
91% 90% 85% 79%
91% 90% 85% 79%
Very important Quite important
BuyingVery
a Car Online
important Quite important
highlighting a positive emotional outcome for
LIKELIHOOD OF BUYING the consumer.
When it comes to the notion of buying a new A NEW CAR ONLINE
car online instead of at a physical dealership, New car..
“Although I know they have ‘negotiable’
the market is divided. Around one in three discounts built into their bottom line it still
(29%) say that they’d consider buying online, 24% feels like you have a little win if you can get a
although almost half (46%) suggest that they’d discount or something thrown in,” said one
not be willing to do so. This highlights that 29% 46% respondent.
LIKELY UNLIKELY
– at this stage – the opportunity for online
interactions within the new car market would “As a single female, I feel like I need these
be niche, with the majority preferring instead skills for myself, and so I enjoy practising and
to navigate existing purchase channels. building my confidence,” said another.
Importance of Car Buying Factors Around half of those who said they don’t
Very likely Quite likely Very likely Quite likely Neutral particularly value the ability to negotiate on the
In total, 91% consider it important to be price of a new vehicle didn’t give any particular
able to test drive a car before buying (63% Value of Car Buying Factors reason for this. Another 15% highlighted a
consider it ‘very important’ to do so). Similarly, sense that the Dealers should just be giving
90% agree that the ability to negotiate on Over nine in ten (93%) specifically say that the best price to the consumer up-front, while
the vehicle’s price is important as part of the they value the ability to negotiate the price 10% feel that the process of negotiating can be
process of buying a new car. This includes of a new car before they buy it. This, taken stressful/difficult.
57% who say that it’s a ‘very important’ part alongside the levels of confidence across the
of the process. Consumers also value the market in interacting with new car Dealers “I would prefer to have an honest interaction
ability to negotiate on add-ons/optional extras and the value placed on negotiating price where I am told a price upfront, then I can
and the advice provided by sales staff. From at a dealership, suggests that discussing and compare between brands and Dealers before
this, it’s clear that many aspects of the Dealer negotiating price in-person at a dealership is I arrive in person. Haggling over price is
experience are highly valued by consumers. an accepted and valued part of the overall new demeaning and tedious,” one person said.
car buying process.
The ability to negotiate on the price of a new Agency Model
car in the dealership is something that is For the most part, customers who value the
ability to negotiate on the price of a new car When the idea of set pricing/no longer being
highly valued by all consumers, regardless of
say that this simply helps them to keep the able to negotiate on the price of a new car is
age, gender or brand of vehicle purchased,
price down/get access to a better deal (51%). tested, around one in three suggest that this
with over 90% of every demographic group
There’s a sense that negotiating is a part of idea appeals to them (30%), leaving 70% who
based on age, gender, life stage, and type of
the process and that customers should have are either uncertain (38%) or who find the
brand bought saying they valued the ability to
a right to negotiate, while past experience idea unappealing (32%). This presents as being
negotiate.
with haggling has been successful. Around a relatively contentious model, with similar
one in ten believe that the ability to negotiate proportions engaged and disengaged by it as a
gives them confidence and empowers them, principle.
10 | APRIL 2021 | automotivedealer.com.auPOLICY Australian Automotive Dealer Association
against it were worried it would put them at a Men are significantly more likely than women
APPEAL OF FIXED-PRICE MODEL disadvantage and lead to higher prices. (58% vs. 48%) to be open to EVs, while they
are more appealing to those who are buyers
Over half (52%) of new car buyers believe that of premium vehicle brands (70% vs. 51% for
APPEALING 30% a shift to a non-negotiable ‘agency model’ of mainstream brand buyers). There’s also a skew
selling vehicles would lead to increased pricing based on age – younger drivers are more likely
for new cars, with one quarter suggesting to be open to buying an electric vehicle.
UNCERTAIN 38% pricing would actually be lowered (25%).
This highlights the extent of concern that The most common reason for being
consumers in the market have with respects to unlikely to consider an electric vehicle is a
what fixed pricing would mean for them in the concern around a lack of charging stations/
UNAPPEALING 32% longer-term. infrastructure (69%). Linked to this, 55%
have a concern that EVs don’t have sufficient
Very appealing Very unappealing
Hybrid & Electric driving range before requiring a recharge. Just
Quite appealing Quite unappealing Neutral
under half (49%) believe that higher purchase
Just over half of the market (53%) say they’re
prices for electric vehicles is their primary
likely to consider buying an electric vehicle
barrier to purchasing an electric vehicle.
The appeal of the agency model/no negotiating or a hybrid vehicle (57%) in future. In both
is relatively consistent across demographics, cases, around one in four are uncertain, and Impact of Brand Discontinuation
although there are tendencies for it to have the remaining 15-20% are unlikely to consider
greater support among younger consumers, such vehicles. Overall, it implies that there’s an When presented with the hypothetical that the
premium brand buyers, and men. openness to alternative fuel sources within the manufacturer of their intended vehicle were
market – whether this converts to behaviour planning to pull out of the Australian market
Reasons given by those who found the agency change straight away is another matter. five years post-purchase, 45% of consumers
model appealing centred around fairness say they’d still likely buy that vehicle while 55%
and the same price for everyone, while those There are some significant demographic skews would not.
when it comes to considering electric vehicles.
Royal Automobile Club of Australia
Incorporating Imperial Service Club
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www.raca.com.au | marketing@raca.com.au | 02 8273 2318POLICY Australian Automotive Dealer Association
ASIC RELEASES DEFERRED SALES MODEL
GUIDE
T
he Australian Securities and Investments prescribed by ASIC (the prescribed six weeks after the beginning of the add-on
Commission (ASIC) has released a draft information). insurance deferral period, add-on insurance
of its regulatory guide to the deferred products may be sold to consumers.
sales model of add-on insurance. A series of prohibitions would be in place Communication with the consumer in forms
during the DSM, which would apply to the other than writing is restricted.
It is not yet the completed article, but does principal provider and related third parties. The
provide an insight into the requirements that are prohibitions relate to: At the end of the six-week period, any
likely to apply to providers of add-on insurance • The third party or principal provider communications with consumers will be subject
when complying with the deferred sales model, sells an add-on insurance product to the to anti-hawking legislation.
and communicate how ASIC will approach consumer, except after the end of the
applications for exemption from the deferred The period before the DSM occurs is called the
add-on insurance deferral period.
sales model (DSM). pre-deferral period. The pre-deferral period
• It is an offence to offer an add-on begins when:
The Australian Government decided to develop insurance product for issue or sale to
• The consumer indicates an intention to
the deferred sales model after the Royal the consumer, or request or invite the
acquire the principal product or service.
Commission into Misconduct in the Banking, consumer to ask for, apply for, or purchase
an add-on insurance product, where: • If there is an add-on insurance deferral
Superannuation and Financial Services Industry
period in relation to the add-on insurance
recommended an industry-wide deferred sales - the offer, request or invitation is not
product, ends immediately before the start
model for add-on insurance. in writing, except during the add-
of the deferral period, or otherwise does
on insurance pre-deferral period or
The intent is to separate the sale of any add-on not end.
after the end of the add-on insurance
insurance from that of the sale of the principal deferral period; During pre-deferral, the consumer can be
product or service. It would apply across all
communicated with but selling an add-on
sales channels, in person and online, with - the offer, request or invitation is
product is prohibited.
a deferral period of four clear days. It is not not in writing, except if the offer or
intended to apply to: request is during the add-on insurance Consumers can be communicated with at
• products that are the subject of an ASIC pre-deferral period or after the end of any stage during the deferral periods if that
product intervention order which imposes the period of six weeks beginning on communication is in response to consumer
a deferred sales period; the first day of the add-on insurance queries, having received the prescribed
deferral period. information.
• comprehensive car insurance;
• products that the Minister exempts by - the offer, request or invitation is not in At any stage during the deferred sales model
regulations; writing, and is made during the add-on periods, a consumer can inform either the
• products and entities that ASIC exempts insurance deferral period. principal provider or a related third party that
by notifiable or legislative instrument; and they no longer wish to receive offers, requests or
- the offer, request or invitation is not in
• products recommended by financial invitations to purchase or apply for an add-on
writing, and is made during the period
advisers. insurance product. Once a consumer has made
of six weeks beginning on the first day
such a request, it is an offence for the principal
of the add-on insurance deferral.
The draft suggests the four-day period provider or a third party to offer, request or
commences at the later of: - before the offer, request or invitation is invite a consumer to purchase or apply for an
• the time the consumer enters into the made, the consumer informs the third add-on insurance product.
commitment to acquire the principal party or principal provider that they do
It is important to stress that this is just a draft
product or service to which the add-on not want to receive such offers, requests
document at this point. The AADA will
insurance product relates; or or invitations.
continue to work with ASIC, and keep members
• the time the consumer is given informed as to the progress of this model.
In the period after the add-on insurance
information about the product as
deferral period, but before the date that is
12 | APRIL 2021 | automotivedealer.com.auPOLICY Australian Automotive Dealer Association
THE YEAR OF REFORM FOR THE AUTOMOTIVE
INDUSTRY
concerns raised by Dealers for a 'more level unilaterally changing contracts,
Evan Stents playing field' were real and not just part of poor compensation and reneging on
Lead Partner, an ambit push for more favourable industry warranties. The Government indicated
Automotive Industry trading conditions in what is otherwise a that strengthening penalties for wilful,
Group, HWL Ebsworth highly competitive industry sector. egregious and systemic breaches of the
Lawyers Franchising Code by large and profitable
This year has already seen the registration multinational companies will act as a
on 12 January 2021 of an amended
2
strong deterrent to this kind of conduct;
021 is looking set to see an Franchising Code of Conduct containing a
unprecedented level of regulatory new 'Part 5' that deals exclusively with new 2. introducing a new mandatory
reform to the Australian automotive vehicle Dealer agreements. In summary, the automotive code to establish best practice
new vehicle industry which will benefit key amendments to the Dealer Code include and address concerns multi-national
new vehicle Dealers. These reforms have amendments to: manufacturers won’t follow the six
largely come about due to the advocacy and voluntary principles launched by the
lobbying carried out at an industry level 1. End of term arrangements requiring: Federal Government on 11 December
to give better protections to automotive a. manufacturers to give 12 months’ 2020 to guide agreements between
Dealers under the Franchising Code of notice in writing of their intention to car Dealers and manufacturers. The
Conduct. (or not to) extend or enter into a new principles were designed to help steer
agreement at the expiry of an existing contract negotiations and build on the
Momentum for regulatory reform started term (replacing the previous clause introduction of a separate schedule to
gaining traction when on 27 February requiring 6 months’ notice); the Franchising Code of Conduct for the
2020, the Senate referred the inquiry into b. manufacturers to give the reasons for auto industry on 1 June 2020;
the announcement by General Motors their decision if it is to not to renew 3. ensuring the Franchising Code remains
Holden on 17 February 2020 to withdraw or extend a Dealer agreement upon its relevant and keeps pace with changes
the Holden brand and operations from expiry; and to business practice by explicitly
Australia, to the Education and Employment
c. manufacturers and Dealers a agree to recognising that Dealers operating as
References Committee (Senate Committee).
a 'wind down plan' for managing the a manufacturer’s agent in relation to
Originally the Senate Committee was to
winding down of the dealership if the new vehicle sales would still gain the
meet and report back to the Senate by May
manufacturer decides not to renew or protections afforded by the Franchising
2020. However, subsequent extensions were
extend a Dealer agreement. Code. This reform is targeted at
granted to allow the Senate Committee
manufacturers such as Honda and
to hear evidence from stakeholders in 2. The prohibition on imposing significant
Mercedes who have announced moving
the automotive sector and examine the capital expenditure by manufacturers on
to an 'agency' distribution model.
regulation of the relationship between car Dealers.
manufacturers and car Dealers in Australia 3. Allowing multi-party dispute resolution The Federal Government also announced
more generally. between Dealers and a manufacturers. that it is committed to working further with
the automotive franchising sector to consult
During the period of the Senate Without even waiting for the Senate on:
Committee's terms of reference, Honda Committee to table its report, the Federal
Australia announced that it was terminating • ensuring appropriate protections for
Government announced on 12 March 2021
a large percentage of its Dealer network in automotive dealerships from unfair
that it intended to make further significant
Australia so that can move to an 'agency' contract terms in their agreements with
reforms for the automotive industry aimed
retail model. Whilst some sectors of the manufacturers;
to address the significant power imbalance
automotive industry have denied any between Dealers and multi-national car • options to achieve mandatory binding
regulatory reform is necessary, the decision companies. These changes include: arbitration for automotive franchisees,
by Holden to exit the Australian market to address power imbalance when there
and Honda's decision to move to an agency 1. increasing penalties under the
is a dispute; and
model had a profound impact on the minds Franchising Code to up to $10 million
of the Senate Committee and the Federal to international car companies that • the merits of a standalone automotive
Government. What the 'Holden' and 'Honda' undertake systemic breaches under code.
restructures have demonstrated is that the the Franchising Code, including
automotivedealer.com.au | APRIL 2021 | 13POLICY Australian Automotive Dealer Association
Along with the reforms to the Franchising payment of bonuses. Often these negotiations Consumer Law. One of the factors that has
Code, on 22 October 2020, the ACCC are constrained by the concern not to prevented Dealers to date from seeking
announced a class exemption that, from early contravene provisions in the Competition protection under the unfair contract regime
2021, will provide new vehicle Dealers (as and Consumer Act 2010 (CCA). This has was a requirement that the applicant was
franchisees) with an exemption from normal sometimes led to Dealer Councils applying to a 'small business' employing less than 20
competition laws to allow them to form the ACCC for an ‘authorisation’ to engage in employees. One of the key reforms is to change
bargaining groups and collectively negotiate collective bargaining. The ACCC authorisation the eligibility to less than 100 employees -
with their manufacturers without needing to process can be slow and costly. The new class which will capture many more Dealers.
apply for ACCC approval. exemption means that Dealer Councils can
now collectively negotiate terms of Dealer Much of the detail of these new regulatory
Dealers for many years now have formed agreements, KPIs and bonuses ‘without reforms will be known once legislated during
Dealer Councils to, amongst other things, needing to worry about a possible competition the course of this year. What is clear is that
represent them in their dealings and law breach.’ these reforms will go a long way in levelling
negotiations with manufacturers. These the power imbalance between Dealers
dealings and negotiations particularly arise Finally, On 6 November 2020, the State, and manufacturers and better protect the
when a manufacturer wishes to propose a Territory and Federal Consumer Affairs significant investments Dealers make in their
new Dealer agreement, amend the terms of Ministers agreed to strengthen and extend dealership businesses.
a Dealer agreement or amend KPIs or the the unfair contract regime in the Australian
GOVERNMENT REFORMS DRIVE DEALERS
TOWARDS A FAIRER FUTURE
3. Explicitly recognising that Dealers Principles 1 and 3 relate to the provision of
Vinesh George operating under an agency agreement are “fair and reasonable compensation” for Dealers
Company Secretary protected under the Franchising Code. that have had an early termination as a result
and Legal Counsel, of their distributor withdrawing from the
AADA | Principal, The specifics of implementation of those Australian market, rationalising their network
VS George Lawyers reforms are yet to be released by the or changing their distribution model.
Government.
O
Principle 5 requires that “reasonable
n 12 March 2021, the Morrison Mandatory Principles provisions” be included in Dealer agreements
Government announced that it would so that distributors can compensate Dealers
be making landmark reforms to the The recent example of General Motors’
or “...buy back new vehicle inventory, parts
automotive industry in response to “the abrupt withdrawal of the Holden brand from
and special tools” in the event of non-renewal,
growing power imbalance” between Dealers Australia and their subsequent failure to
market withdrawal, network rationalisation or
and distributors. work in a cooperative manner with Dealers
changes to the distribution model.
is illustrative of the general inadequacy
The Government committed to making the of reliance on distributors’ good faith and Principle 2 explicitly precludes distributors
following reforms to the Franchising Code: voluntary principles. Voluntary principles from including provisions that exclude
1. Making the voluntary best practice can sometimes have the positive effect compensation in new dealership agreements.
principles (listed in the table on page of promoting ethical business practices,
15) for new car dealership agreements however, they are significantly inhibited by The necessity and rationale for mandating
mandatory. their inability to create an environment of “fair and reasonable” compensation for Dealers
compliance and accountability. was evident in the unfair compensation
2. Increasing penalties under the Franchising
offered by GM Holden to its 185 Dealers.
Code to up to $10 million for “wilful, Dealer Compensation The recently released Senate report on the
egregious and systemic breaches” of the
Regulation of the relationship between car
Code, such as unilateral contract changes, Principles 1, 2, 3 and 5 of the mandatory
manufacturers and car Dealers in Australia
poor compensation and reneging on principles relate to the inclusion of provisions
provided countless examples of submissions
warranties. for compensation in Dealer agreements.
that were concerned about the adequacy of
14 | APRIL 2021 | automotivedealer.com.auPOLICY Australian Automotive Dealer Association
Mandatory Principles for New Car Dealership Agreements
Franchisors should include provisions in new dealership agreements that provide for fair and reasonable compensation for franchisees in the
event of early termination resulting from:
Principle 1 • withdrawal from the Australian market;
• rationalisation of their networks; or
• changes to their distribution models.
Priciple 2 Franchisors should not include provisions that exclude compensation in new dealership agreements.
The ‘fair and reasonable compensation’ as referred to in Principle 1 should include appropriate allowances for the loss a franchisee may incur,
which can include:
Priciple 3 • lost profit from direct and indirect revenue;
• unrecovered expenditure and unamortised capital expenditure when requested by the franchisor;
• loss of opportunity in selling established goodwill;
• wind up costs.
When an agreement is entered into it should provide franchisees a fair and reasonable time to secure a return on investments that have been
Priciple 4
required by franchisors as part of the agreement.
Agreements should include reasonable provisions for franchisors to compensate or buy back new vehicle inventory, parts and special tools, in the
event of:
Priciple 5 • non-renewal;
• withdrawal from the Australian market;
• rationalisation of their networks; or
• changes to their distribution models.
Priciple 6 Agreements should include provision for timely commercial settlement and dispute resolution.
compensation offered by GM Holden. Of facility requirements, it can take many years Increased Financial Penalties
particular concern was the submission by for them to recoup their investment. Short
an anonymous Dealer, who noted the wide term Dealer agreements place enormous The decision to increase penalties for a breach
disparity between the compensation offered pressure on Dealers to meet what are often of the Franchising Code to a maximum of $10
by GM Holden, and the value of KPMG’s unreasonable demands from distributors, million is a welcome and necessary change.
independently determined compensation or else face the ever-present threat of non- In its response to the Fairness in Franchising
of the true amount owed to Dealers. The renewal. Principle 4 provides an important Report released in 2019, the Government had
concept of “fair and reasonable” compensation safeguard against Dealer exploitation and will previously committed to doubling penalties
creates an independent standard with which require distributors to reconsider the length of from 300 penalty units ($66,600 from 1 July
to evaluate the compensation being offered the terms they set for their Dealer agreements. 2020) to 600 penalty units ($133,200) for
by distributors. While determining what is breaches of the Franchising Code. However,
“fair and reasonable” may present practical Provisions for timely commercial settlement given the substantial wealth and revenue of
difficulty, having this enforceable standard can and dispute resolution overseas multinational distributors, such
help prevent the excess abuses of distributors penalties were deemed too small to have a
Principle 6 states that agreements should deterring effect on poor corporate practices. It
who significantly and unfairly under-
include provisions for timely commercial is hoped that the radical increase in financial
compensate Dealers.
settlement and dispute resolution. Given the penalties is sufficient to deter distributors from
Fair and reasonable time to secure a return on difficulty that Dealers and distributors have in engaging in unethical practices.
investment resolving disputes and settling matters in an
efficient manner, having provisions in place in Conclusion
Principle 4 requires distributors to provide a Dealer agreement will assist in helping both
Dealers with “fair and reasonable” time to parties cooperate in finding a solution without The Government’s reforms of the automotive
secure a return on the investments they resorting to litigation. Nevertheless, given that franchising sector are welcome as they
have made in accordance with their Dealer principle 6 has only vague specifications, it is continue to level the playing field. Dealers can
agreement. As Dealers expend significant unclear how current practice will evolve as a look forward to future reforms, which will
sums of money complying with dealership result of the need to have “timely commercial continue to foster healthy business relations
settlement”. between distributors and Dealers.
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automotivedealer.com.au | APRIL 2021 | 15FEATURES Australian Automotive Dealer Association
DIGITAL FOCUS OF NADA SHOW
T
he National Automobile Dealers reported in their recently released Motor Ford CEO Jim Farley said that he sees that the
Association (NADA) held its 2021 Show 150 report. “It was encouraging to hear that biggest impact for Ford in the future will be
online in February, and unsurprisingly, multiples have not changed significantly in connectivity, rather than the electrification of
the focus was heavily tilted towards digital the US and as always the franchise is the key vehicles.
marketing and online activity. driver for the multiple valuation,” the BDO
report says. “It was also interesting to hear that COVID-19’s Effect On Franchise Value and
BDO’s Steve Le Bas, Partner – Head of Motor only 12% of businesses transition to the third the Buy/Sell Market
Retail, and Malcolm Thixton, Partner – Motor generation in family ownership and in the US
Retail, ‘attended’ the Show and produced a Erin and Ryan Kerrigan of Kerrigan Advisors
this could increase M&A activity.”
comprehensive report. delivered a presentation highlighting that
Glenn Mercer delivered his updated review dealerships profits had rebounded since the
One of the key takeouts was that like the UK on the 'Dealership Of Tomorrow', concluding lows of March 2020 to record levels during the
motor retail industry, the US has rebounded that the dealership model is in good health, US Summer, indicating that the industry was
very strongly since Spring 2020 and like the remains profitable and will continue to develop both resilient and nimble.
UK, Dealers have adapted well to the new way via evolution rather than revolution. Glenn
of working and interacting with customers. The record level was achieved through
will continue to update his review and deliver
increased margins and reduced expenses,
it to the AADA 2021 National Convention &
As in the UK the turnover of staff in the rather than greater volume. The average used
Expo in Brisbane in September.
industry remains too high and the Dealers to new ratio increased to 1.15:1 compared to a
that are the most successful are the ones that Likewise, Jared Hamilton of Driving Sales will five year average of 0.8:1. However, Erin stated
have cracked the employment proposition by bring his presentation “Build Millennials and the P&L is still in a state of flux and questioned
offering a career path, investing in the right Gen Zs into Your Highest Performers” to this whether these increases in profits were
training for the staff and provide timely and year's Convention. As he did at the NADA sustainable and could then increase future
constructive feedback to allow continued Show, Jared will explain why without the right value. She concluded that they probably were
development. skilled people Dealers will never be able to not and were being led by lower headcount.
access the full value of their business. You need In the US in September 2020, only 56% of
In the US they are forecasting increased M&A Dealers were fully staffed and the average units
to optimise your greatest asset – your people
activity in 2021. This is in line with what BDO sold per month per sales person had increased
and in particular the Millennials.
by 60% from 2019 to 16 per month.
16 | APRIL 2021 | automotivedealer.com.auYou can also read
