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SA parts ban: Industry shake-up

2013-07-03 13:09

USED-PARTS SHAKE-UP: SA insurers and the used-car industry could be drastically affected if it becomes illegal to deal in used car parts. Image: AFP

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Author: Jonathan Faurie

 

An amendment to the National Road Traffic Management Act that could ban the sale of used car parts could have a drastic effect on the vehicle insurance industry.

The banning of the sale of used car parts is just one of several amendments Wheels24 reported on in 2012.

‘SEVERE CONSEQUENCES

Among them are tougher regulation of driving schools and instructors, a roadworthy test for vehicles older than 10 years every two years and a probation system for new drivers.

FAnews' JONATHAN FAURIE says the public and used-parts dealers would be drastically affected:


"The foundation of the motor insurance industry could be shaken to the core if government goes ahead with plans to ban the sale of second-hand car parts as replacement parts on damaged vehicles.

The public and used-parts dealers would be the most affected. Although the ruling has not been set in stone, it seems that there is more to the story than mere rumour.

The South African Insurance Association (SAIA) met on July1  2013 to debate the issue and Viviene Pearson, general manager responsible for motor insurance at SAIA, said the ruling, if implemented, would damage the industry.

Pearson added: “The proposed regulation that the parts of a Code 4 vehicle (one permanently unfit for use – write-offs or vehicles with major structural damage) may not be used to build or repair other motor vehicles, will have severe unintended consequences to both the insurance industry and its customers.”

INDUSTRY CONSULTATION

SAIA is to meet the transport department to discuss the issue.

“We have forwarded our code of motor vehicle salvage to the DoT. It addresses quite a few of the gaps and we hope this will assist in convincing the department that we are just as committed as it to combat vehicle crime and to ensure that only safe and roadworthy vehicles are put back onto the road," she added.

“Our members have agreed to provide the department with as much information as possible to enable it to make an informed decision.

“We have also agreed that our code of motor vehicle salvage must be used to address any potential gaps but must also be vigorously implemented by our members to ensure that we address issues of concern to all those involved in the fight against vehicle crime.”

Are we fully aware of the effects on the industry?

CONSUMER PINCH

Pearson said that if undamaged parts of a permanently dismantled vehicle may not be re-used it would result in a loss of revenue (for salvage) to insurers.

“In addition, if the usable parts of demolished vehicles cannot be used as second-hand parts, the unintended consequence will be an increase in the cost of repairs as insurers will have to use new, much more expensive, parts to repair older accident damaged vehicles.

“Insurers may have more frequently to declare vehicles uneconomical for repair which will further increase repair costs. These factors will ultimately increase vehicle insurance premiums.”

The SAIA believed the proposed change could unintentionally lead to an increase in vehicle crime as used parts would become scarce and sought after. It supported the fight against vehicle crime but suggested other processes should be explored to prevent it.

INDUSTRY EFFECTS

Apart from the consumer, the second-hand parts industry would be significantly affected by the ruling.

A Durban based dealer said he has no idea of the marketplace: “We are stripping 2012, 2013 vehicles. One side may be damaged, the other three not, so those parts are in excellent condition. They have clearly not consulted the industry, insurance companies or others in the market.”

Andrew Ensor-Smith of ES Brokers said banning the sale of second-hand car spares would be something the government needed to consider very carefully:  “The ripple effect will be enormous and reach out to many legitimate businesses.”

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