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A GOVERNMENT inquiry into the fractious relationship between Holden dealers and Holden parent General Motors has spilled over to the broader Australian car retailing industry with an expanded Senate inquiry now poised to bring car-makers and their franchised dealers under intense scrutiny.

The genesis has been Australia’s retreating economy which has stung the car sector with almost 30 months of falling new-car sales.

The effect – since exacerbated by the pandemic – has shaken the relationship between dealers and car-makers and has been the catalyst to the withdrawal of General Motors’ Holden brand, the appearance of agency retail modelling and calls for a stronger code of conduct specific to the auto industry.

Now, the Senate standing committee on education and employment has elected to expand the initial Holden inquiry to encompass all OEMs and franchisees.

Holden inquiry senators – Labor’s Deborah O’Neill, Louise Pratt and Don Farrell – said in a statement this week that the conduct of OEMs had a “devastating effect” on Australian car dealerships.

“Overseas companies such as General Motors don’t have Australian businesses at heart when making decisions from their overseas head office,” the senators’ statement said.

“More car manufacturers are changing their business models along the same lines as GM.”

The Australian Automotive Dealers Association (AADA) said the matter was of extreme importance and would bring equality and fairness to the industry.

Its CEO James Voortman said: “We hope it will pave the way for reforms to protect Australian dealers in the same way the US and EU protect their dealers against the power of large car companies.”

“There is plainly a massive power imbalance between Australian dealers and the multinational car manufacturers to which they are franchised.

“Dealers take on the majority of the risk and are compelled to invest very large sums of capital in facilities, personnel, stock and equipment, but are offered very little in the way of protection if a manufacturer decides to terminate a dealer, leave the country or completely change its distribution model,” Mr Voortman said.

The AADA said of concern is a code of conduct that fails to protect businesses such as dealerships and opens the sector up to retail concepts that may further disadvantage dealerships and affect their ability to maintain business and employment.

Changes in the industry already unveiled include Honda announcing last year that it would use an agency model to retail its cars in Australia. The agency model is used by Honda in New Zealand and has subsequently been adopted in that country by Toyota.

It operates by appointing dealers as agents and paying a commission on the sales of vehicles, removing them from many of the profit-making functions of retailing while relieving them of outgoings such as inventory holding costs.

Daimler AG is planning a similar agency model for its global Mercedes-Benz outlets, including Australia, from 2022.

The previous committee inquiry learnt that Holden franchisees were not told of the brand’s proposed exit from Australia and yet were required to make expensive changes to their dealerships to maintain the franchise.

The AADA believes that a separate franchise code of conduct for the automotive industry would be needed to lay the rules between dealers and OEMs.

The Holden senate inquiry, now closed and with its outcome to be made public in November, led to federal government industry minister Karen Andrews and employment minister Michaelia Cash changing parts of the existing franchise code.

The changes included encouraging dispute resolution and limiting a dealer’s capital expenditure.

However, the changes made were only to be voluntary, leading to dealers and the AADA calling for greater action which would lead directly to the new inquiry.

The Federal Chamber of Automotive Industries has been approached for comment.

By Neil Dowling

Dealer Auction