09 Mar 2022

Minister of Investment, Trade and Industry says market intelligence gathered through the Competition and Consumer Authority (CCA), shows that the bundling of cost of vehicle service or maintenance in the overall price of a new vehicle is not necessarily done by vehicle dealerships, but rather vehicle manufacturers. 

In response to a parliamentary question on Tuesday, Mr Mmusi Kgafela said mostly, vehicle dealerships followed the business format of franchising which was controlled by motor vehicle manufacturers. 

As such, he said motor vehicle dealerships just complied with what the manufacturer had stipulated in their requirements and conditions while the motor vehicle dealership market was normally described as after-sales or aftermarket. 

He added that the motor vehicle manufacturing market being the upstream market was normally the primary market. 

Currently, he said the market in Botswana for most vehicles was characterised mainly as the after-sales market or aftermarket, adding ‘this market deals with retailing of motor vehicles, sale of vehicle spare parts and equipment. It also provides for service, maintenance and repairs of motor vehicles within the standards that are set by manufacturers. 

We have also established through CCA that manufacturers opt for this strategy because of issues of quality and reputation, hence the bundling within a specified period.’ 

The minister acknowledged that such could limit consumer options on the price as it was bundled with other future cost that the consumer could have a choice on. 

“It may also limit transparency and this price structure could create an environment that may limit price competition. As indicated above, suppliers opt for this strategy because of issues of quality and reputation,” he said. 

Further, Mr Kgafela explained that motor vehicle dealerships were just implementers as franchise operators while manufacturers were the business strategy drivers. 

“Motor vehicle manufacturers state dealerships that have been identified as qualified to satisfy the minimum set quality standards for repairs and maintenance for the warranty to remain intact. The market intelligence gathered points to vehicle manufacturers employing such as strategy mainly to protect the brand reputation,” he said. 

Again, the minister highlighted that bundling of cost of vehicle service or maintenance in the overall price of a new vehicle was an international practice and should not be limited to only vehicles. 

Botswana, he said imported almost everything including heavy duty machinery, cell phone sets, TV sets and radios, adding therefore any move designed to go as proposed by Kanye North legislator, Mr Thapelo Letsholo, may result in manufacturers taking their business elsewhere. 

He said consumers had the right to choose and upon expiry of motor plans, consumers may choose to part with the dealership for maintenance of their vehicles or extend the plan as long as they can afford. 

Mr Letsholo had asked the minister to update Parliament on the competitive (or non-competitive) nature of the motor vehicle industry in Botswana, particularly vehicle dealerships, vehicle service plans and vehicle maintenance plans. 

He asked why some dealership embed and bundled the cost of vehicle service or maintenance in the overall new vehicle price. 

Mr Letsholo further wanted to know why manufacturers and dealerships prohibited vehicle owners from repairing or servicing their new vehicles at independent service providers and voiding warranties. 

Also, the MP asked what would stop government from passing a law that compelled vehicle dealership to separate the cost of the vehicle from that of service and maintenance so that consumers could choose their own service providers for service and maintenance. 

Finally, he wanted to what benefits would accrue to the country in terms of employment creation, to local mechanics and associated service providers, and to consumers, if government implemented the former. End