The Australian Automotive Industry Assn. is asking the next federal government to create an automotive dealership franchising code of conduct.
AAIA, a new national body representing the retail automotive industry in Australia, says the regime to take over after the general election Aug. 21 should recognize the unique circumstances of the retail automotive sector.
“Retailing motor vehicles is not comparable to selling pizzas, coffees or hamburgers,” AAIA acting-CEO David Purchase says. “Motor dealerships are unique to virtually all other businesses, certainly unique to all other franchise models.”
Purchase says the investment required to operate a dealership is immense, typically in excess of A$10 million ($9 million), as well as millions of dollars of vehicle stock.
“The value of this investment is totally dependent on the franchise agreement,” he says.
A standalone “motor-vehicle franchising code of conduct” should be developed and enacted to enable dealer principals to confidently invest in their business.
“Dealerships are totally dependent on the factories (or distributors for their business), supply of vehicles and parts,” he says. “Franchise agreements typically provide for a 3-5 year tenure and are, in almost all instances, presented on a ‘take it or leave it’ non-negotiable basis.”
The code of conduct would address the ability of the distributor to effect unilateral changes to franchise agreements before their expiration.
It would also prevent the use of sales targets as a discipline. Currently, unrealistic targets are set by the distributor, and when a dealer fails to meeting these targets, it is found to be “in breach,” AAIA says.
The code should address indirect pressure placed on dealers not to diversify and take on other brands, the group adds. While this already is legally forbidden, dealers with multi-franchises have to establish stand-alone premises.
Additionally, AAIA says the code should stop dealers from being forced to order and carry stock levels and mixtures that may not suit their businesses. Distributors bundle fast- and slow-moving stock together, the group says.
“AAIA is not saying motor-vehicle dealerships are better than other franchisees and therefore deserve special treatment,” Purchase says.
“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.”