Cyber cars: Why independent auto retailers are reporting sales they haven’t made

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.

Reports have surfaced that some auto dealers are pre-reporting the sales of vehicles before they find a buyer to keep up with sales quotas.

The existence of so-called ‘cyber-car’ phenomena — given this name because the sales exist on a computer only — was confirmed by the ACCC last month in an undertaking with Volkswagen Australia.

The ACCC is concerned about the practice, namely because it reduces the warranty period of purchased vehicles, affecting consumers.

David Blackhall, chief executive of the Australian Automotive Dealers Association (AADA) has written to ACCC chair Rod Sims and Assistant Treasurer Stuart Robert to call for an industry-specific code of conduct to relieve pressure on independent dealers.

“Refusing to pre-report these vehicles is simply not an option for many dealers as they fear the manufacturer will withhold important incentive payments or even worse cancel their franchise agreement,” Blackhall said in a statement.

SmartCompany understands many small dealerships feel as though the current regulatory framework doesn’t adequately address their concerns.

Independent car dealerships enter into dealership agreements, covered under the franchising code, with large car manufacturers, often paying millions of dollars in start-up costs to establish a location.

Dealers report being strong-armed by their business partners, including having dealer agreements ended with little notice or receiving a stiff deal when consumers return faulty cars.

Pressure is now building on the federal government to change the rules after Labor quietly announced last month that it would tell Treasury to work with the ACCC and industry to draft a “legislative instrument for a mandatory code”.

In a speech to the AADA last month, shadow assistant treasurer Andrew Leigh said a code would deliver small businesses in the industry a better deal.

“Power imbalance manifests itself in a number a ways, and if it continues to go unaddressed, we may see an increase in either market concentration of dealerships, or in the market power manufacturers can exert, with an inevitable decline in positive outcomes for consumers and the family-owned and small businesses that serve them,” he said.

Labor wants the code to deliver “clear ground rules” covering how dealerships and manufacturers decide on warranty and repair processes, the handling of consumer complaints and termination notices.

“Such a code should enshrine principles of fairness which would address issues like security of tenure; unfair capital expenditure requirements; and unfair end of term arrangements,” Blackhall tells SmartCompany.

NSW cuts red tape

Meanwhile, the NSW government has stepped in with some reforms of its own.

NSW Minister for Better Regulation Matt Kean unveiled a package of changes on Monday which he claims will save independent auto retailers $175 million over 10 years.

Laws that require motor dealers to obtain multiple dealership licences will be scrapped, alongside a rule that stops them selling cars at trade shows.

It will also be easier to dispose of abandoned cars under the new laws, while the new system will introduce specialised licences for the industry.

“You also know that regulation has gone wild when you can’t buy a car at a car show,” Kean said in a statement on Monday.

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