1st June, 2020 ยท Media Release

New Car Dealer Regulations First Step,
Further Action Urgently Required

The industry body representing new car Dealers acknowledges new automotive franchising regulations but has urged the Government to move urgently to address unresolved issues which allow offshore car Manufacturers to squeeze local Dealers.

“These regulations which begin today are a good first step, but given recent developments with General Motors’ termination of 185 Holden Dealers, it is clear we have to go further,” AADA CEO James Voortman said.

“The real announcement today is the Government’s commitment to work towards developing an industry standard for compensation and also address the issue of tenure in Dealer Agreements,” he said.

“These are very important issues and they need to go beyond yet another roundtable and result in action,” he said.

“An industry standard for compensation must establish a fair and reasonable framework for those car Manufacturers who are looking to exit the country, rationalise their Dealer networks or change their distribution model,” he said.

“Dealers commit significant investments in capital, and many have formed decades-long partnerships with Manufacturers. They deserve fair and reasonable compensation when these agreements are ended prematurely and unexpectedly,” said Mr Voortman.

“It’s also important that we address security of tenure and consideration of a reasonable minimum term for Dealer Agreements, something the ACCC addressed in its 2017 market study,” he said.

“Taking on a new car franchise is an incredibly costly exercise and profit margins are very slim. Dealers deserve to be given agreements which are long enough to enable them to recover investments. Currently there are Dealers on one-year agreements which is just manifestly inadequate,” he said.

“It is important that the Government moves to put stronger protections in place as soon as possible. The industry is in a state of change and Manufacturers are actively considering changes to how they distribute products. They naturally have the right to do so, but it’s important that any changes are fair and transparent for affected Dealers,” said Mr Voortman.

“We need to encourage investment and to ensure that local car Dealers have the confidence to hire people and undertake the economic activity needed to support the many small and medium businesses that do work with car Dealers especially in those communities recovering from drought and bushfires as well as coronavirus,” he said.

New car Dealers are located in cities and country towns across Australia, where they employ around 60,000 people and are responsible for more than $55 billion in sales.

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