Automotive franchising protections
The concept of a power imbalance in the automotive franchising sector is well established, but franchising regulations in Australia continue to leave new car dealers exposed to exploitative behaviour. Dealers make significant non-negotiable investments in their businesses prescribed by Original Equipment Manufacturers (OEMs) as part of the franchising agreement, often resulting in a lopsided dependency. Dealers frequently lose bargaining power due to this dependency, leaving them at the mercy of OEMs who can leverage this imbalance to their advantage.
Manufacturers exploit this vulnerability, exposing dealers to unfair practices and engaging in various practices that cause harm. The AADA continues to advocate for a range of recommendations that are fair and reasonable, in order to combat this power imbalance and improve the productivity and viability for Australian automotive dealers into the future.
Key Recommendations
- Introduce comprehensive Unfair Trading Practices protections for all franchisees
- Expand current Unfair Contract Terms protections to all franchisees
- Support better access to justice for Australian automotive dealers
- Franchisees should be entitled to compensation for goodwill upon non-renewal/termination
nves and ev transition
The automotive industry is undergoing significant change, with industrialised nations encouraging the adoption of lower-emission vehicles to reduce CO2 emissions, mainly through vehicle efficiency standards. Australia has introduced the New Vehicle Efficiency Standard (NVES), a major market intervention to support this shift.
The adoption of EVs will bring a range of economic, environmental, and social benefits to Australia. As zero and low emissions vehicles become more prevalent, new car dealers will play an important role in supplying those vehicles to the market, as they sell the overwhelming majority of new cars in Australia.
The AADA’s policy proposals highlight the franchised new car dealer industry’s support for an ambitious but equitable transition to lower and zero emission vehicles and detail a number of recommended measures which can assist in easing the compliance and regulatory burden of this transition on dealers.
Key Recommendations
- Move the NVES point of compliance to the point of sale
- Revisit requirements for entities under mandatory climate reporting legislation
australian consumer law - supplier indemnification
The Australian Consumer Law (ACL) (contained in Schedule 2 of the Competition and Consumer Act 2011) came into operation on 1 January 2011 and provides a single generic consumer protection law including a system of consumer protections and remedies in relation to defective goods and services known as ‘consumer guarantees’.
Car manufacturers and dealers are under a legal obligation to comply with the requirements of the ACL’s consumer guarantees. Unlike nearly all car manufacturers, dealers are customer facing and as suppliers of goods and services, must uphold their obligations under the ACL regardless of a manufacturer’s warranty policy.
Manufacturers for their part are required to indemnify dealers who are required to honour consumer guarantees, however often dealers are denied indemnification due to prohibitively complex and burdensome claims procedures and prescriptive compliance and audit processes. It is critical that in the process of manufacturers managing a dealer’s response to an ACL issue, the obligation to indemnify dealers for performing repairs under the ACL is honoured.
budget and taxation
The automotive taxation system spans from the federal LCT to state-based stamp duties, with Australian motorists paying more than $39 billion in state and federal taxes. As the new vehicle market evolves and Australians turn to lower and zero emissions vehicles, Australia’s taxation regime must keep pace to ensure our system continues to be fit for purpose.
There are several different automotive-related taxes at different levels of government, which are often inefficient and outdated, a relic of an era when Australia manufactured vehicles, such as the Luxury Car Tax and Passenger Vehicle Tariff.
The Government must also look to establish an effective and equitable national road user charging system. In recent years, states have sought to establish their own state-based road user charging systems, but following the invalidation of such state charging systems, the AADA would urge the Government to take a national approach to road charging to ensure national consistency.
Key Recommendations
- Undertake a comprehensive root and branch review of Australia’s automotive tax regime
- Abolish or reform the Luxury Car Tax
- Abolish the Passenger Vehicle Tariff
- Take a national approach to road user charges
skills shortage
Australian labour market conditions are tight, and a shortage of skilled people to work in dealer workshops is harming productivity and holding back business improvements. Without a talent pool of available automotive trade workers to fill positions, consumers will find that servicing and repairs of their vehicles are delayed.
The AADA supports the listing of automotive trade occupations on the Core Skills Occupation List which identifies in-demand occupations, and supports promotion of policies that expand training and employment opportunities for people who can use their talents to become automotive technicians.
truck dealers
When Part 5 of the Code was introduced, it applied only to the franchised new car sector, overlooking the relationship between OEMs and truck dealers, which shares many similarities. These include high capital expenditure for facilities, stock, and trained personnel; the requirement for unique, specialized facilities; and truck dealers’ significant role as employers. Additionally, trucks are high-value, sophisticated products with extended after-sales relationships, and truck dealers provide vital community services like vehicle safety recalls.
Despite good relationships with OEMs, truck dealers often face unfair contract terms, burdensome administrative tasks, one-sided agreements, and non-renewal of contracts with little notice. The lack of protections in the truck industry, combined with a power imbalance and concentrated market, makes it difficult for dealers to negotiate or exercise their rights. The absence of coverage for truck dealers under Part 5 is an oversight, and given their significant investments, essential services, and the worsening power dynamics, stronger protections are urgently needed.
