Franchising And Auto Aftermarket In The Spotlight At The Eastern Cape Auto Franchising Indaba

According to Fred Makgato, CEO of FASA, “Franchised businesses in the Automotive Products & Services can play an important part in offering opportunities for entrepreneurs in the Eastern Cape to be part of a growing sector that has further opened up as a result of government’s right-to-repair policy. We look forward to leading the discussion on what franchising can offer and why it is the best option for nurturing entrepreneurship, in skills training and in job creation.”

As used car sales soared during the pandemic and new car sales have picked up since then, car owners will always need car services, auto body repairs, new tyres or reconditioned batteries. The question remains – who to go to for reliable and efficient service – a franchised auto service or a backyard mechanic?  Whilst both have their place in this competitive market, the franchise model offers a tried and tested business with high standards – a business format that the backyard mechanic should consider switching to.

‘Right to Repair’ opens up the market

Despite the devastating effects of the pandemic and its economic fall-out, new vehicle sales in South Africa maintained their climb in July 2022 which is reassuring, according to the Automotive Business Council (NAAMSA) – rising 6.2% compared with the previous month , even though exports declined slightly from June. Even though exports declined slightly from June, on a year-on-year basis, sales and exports surged, but from an extremely low base as July 2021 were marred by the riots in KZN and parts of Gauteng. The July 2022 new passenger car market at 31 455 units had registered an increase of 10 517 cars, or a gain of 50,2%, compared to the 20 938 new cars sold in July 2021.

That is good news for the Automotive Aftermarket and some experts are predicting a growth of 5.5% expected until 2023 as a result of the ‘Right to Repair’ policy which opens up opportunities for existing and new entrants, most notably small-sized businesses. “As a province, the Eastern Cape has a large number of after-market service providers who are not in the mainstream of the economy but are creating employment within the province” says Thabo Shenxane, CEO: AIDC-EC. “The time has come to unlock the potential of these entrepreneurs and find solutions to anchor them into the automotive sector value chain, and this platform will seek to do just that.”

The sector as a whole has exhibited strong growth since the early 2000s and the introduction of the right-to-repair policy is expected to have a significant impact on both the aftermarket retailers and the repairer industry. By reducing barriers to entry, this policy will encourage new entrants into the market and raise competition amongst industry players – with the end result being more competitive pricing of servicing/repairing vehicles that remain under warranty from the factory.

According to Pertunia Sibanyoni, FASA”s Chairperson, “Franchising has always been ahead of the curve and this new right-to-repair policy will open the doors for a variety of new franchise opportunities in the auto aftermarket space on all levels – from the sophisticated state-of-the-art auto services and products, car sales to formalizing the backyard mechanics.”

Indaba host – the AIDC EC – has arranged the Eastern Cape Auto Franchise & ‘Right to Repair’ Indaba to showcase opportunities for black entrepreneurs, in particular, in the automotive value-chain. The new policy, says AIDC CEO Thabo Shenxane, “provides a massive opportunity for inclusion, transformation and job creation in the sector, all of which are key targets of the South African Automotive Masterplan.” Shenxane said the AIDC-EC, as an implementing arm of the Eastern Cape Provincial government, was intent on “making measurable progress on these masterplan targets to drive socio-economic development in the Eastern Cape.”

The first day of the Auto Franchise Indaba has put franchising at the front and centre of entrepreneurial development and transformation and will revolve around understanding the business format of franchising and the business opportunities it offers in this sector – not only in respect of the big well-known brands but also in the opportunities that exist in the social, tandem and micro franchising fields – which would offer affordable lower-entry opportunities, often with public/private participation. Top automotive franchise brands that are members of FASA will give presentations on their business opportunities and their formula for success. Funders, including sefa, the ECDC and the commercial banks with franchise divisions will discuss the criteria to getting financing to start and run a business.

AIDC-EC leads in establishing an industry transformation roadmap

The Automotive Industry Development Centre – Eastern Cape (AIDC-EC) has aligned its resources to directly impact targets set jointly by government and industry in the South African Automotive Masterplan and is committed to achieve solid, measured progress in this regard. On the back of implementing SAAM 2035 Pillar No 5 and the Competition Commission Guidelines and in the interests of formalising the township economy, the Auto Franchise Indaba will bring together both public and private entities to examine and find opportunities to grow the automotive sector in the Eastern Cape.

The second day of the Indaba will bring together government entities and industry bodies that service the Automotive Aftermarket to discuss the issues that impact the economic development so crucial to the future of the Eastern Cape. From government and provincial level, this includes the Mayor, Eastern Province Provincial government, the Competition Commission, sefa, Government Fleet Agency, DEDEAT & Treasure. Industry bodies taking part include the South African Insurance Association (SAIA), Retail Motor Industry (RMI), Motor Industry Bargaining Council (MIBCO) & the African Panelbeaters & Motor Mechanic Association (APMMA).

For further information visit www.aidcec.co.za/events or Strategic Automotive Events.