This time last month, the ACCC released a preliminary issues paper stemming from a review into the new car industry. The report contained no fewer than 55 separate issues, and was spurred by a heightening number of complaints lodged by consumers in a year where new car sales look set to post record numbers.
Among some of the issues raised were topics including: the structure of the retail motor vehicle industry; misleading data for fuel consumption and emissions; service agreements after the purchase of a vehicle; consumer rights, guarantees and warranties; plus many other facets. Despite some of the misgivings that certain stakeholders may have raised, we’ve already seen a couple of major issues arise within the last fortnight that reinforce the need for the industry wide review to be extensive.
First, the financing arm of BMW Australia agreed to an enforceable undertaking with ASIC after the watchdog’s investigation led to findings that the financier had been irresponsible in its lending activities. ASIC cited numerous examples across a five year period where the lender provided sums of money to individuals who had no reasonable prospect of being able to afford the loan, or repay it. In turn, the auto-maker’s financing operations will be hit with a bill in excess of $70m, consisting of write-offs, rate reductions and direct compensation.
The second embarrassing moment for the industry in as many weeks is still circulating around the press. Following ongoing concerns from the Dieselgate saga, the AAA set about testing Australian vehicles for their performance in terms of fuel efficiency and emissions – compared with their laboratory ratings. While the testing is still ongoing, results to date have indicated our vehicles are underperforming against their sustainability specifications.
In particular, a 20-35% difference has been identified in the level of “emissions and noxious gasses” in the real world compared with lab controlled conditions. That is, emissions are up to 35% greater than the levels advertised by auto manufacturers to the public – which is made up of an ever increasing amount of environmentally savvy buyers. Although there is no suggestion whatsoever that manufacturers are tweaking with systems to ‘cheat’ tests, the discrepancies expose a major flaw in the methodology with which testing is conducted and used as the basis for advertising performance metrics.
As the ACCC’s review continues it may well be possible there are other skeletons hiding in the closet. Therefore, not only is it prudential the investigation stems deeper into other issues, but it is necessary also. One such area is the issue of safety ratings, which have been excluded from the focus topics. Given this aspect is a highly influential factor among new car buyers, the consumer watchdog should take it upon itself to ensure such information is being used in the correct context and in a like-for-like manner. With car recalls at a record high, and consumers increasingly frustrated by the limitations of lemon laws, there is little margin for error – for everyone’s sake within the industry.