Between us, we Australians own 19.5 million cars, which is not bad given there are only 25 million of us. In fact, most of our homes have two or more vehicles under the carport. And for most of us, a car is the second most expensive purchase we will ever make.
Don’t think about it too much but if you buy a new car for $50k, pay it off over five years and sell it, that piece of metal will cost you $82k, not to mention the $71 a week you hand over to your friendly lack of service station for a few litres of liquid Saudi gold.
So, it’s a big, important industry that affects as many punters as, say, the banking industry. When the ACCC did a review a couple of years ago, car dealer revenues were around $64 billion.
It’s an industry where manufacturers, distributors and dealers make a shed load more money from the razor blades than the razors (new cars). In a new car dealership, sales, repair and service generate just 15 per cent of sales but 49 per cent of profit.
As the ACCC said: “A common pricing strategy for car manufacturers is to discount new car prices to maximise sales of aftermarket services.’’
In 2017 the ACCC said: “Consumers are having difficulty enforcing consumer guarantees when problems occur with new cars. A significant body of evidence suggests systemic failure in consumers enforcing consumer guarantees after the purchase of a new car.” The ACCC is also concerned by what appears to be a dominant “culture of repair” underpinning manufacturers’ systems and policies for dealing with car defects and failures, even where cars have known and systemic mechanical failures that would entitle a consumer to a replacement or refund under the consumer guarantees.
That was two years ago and not much has changed. It’s even got worse in some areas, particularly when it comes to your safety.
Well, we did have a banking royal commission where Kenny Hayne was pretty savage on car dealers bundling up finance, insurance, space trips, accessories, in-car espresso machines, disco lights and funeral plans. He said in some cases, car dealers were pocketing 79 per cent of the premium for add-on insurance products.
The new car industry behaviour is a great example of gaslighting. The manufacturers spend millions trying to make you believe you are in a parallel universe where mum, dad and three kids (not many same-sex couples in car ads) buy a new car and immediately life becomes carefree.
For instance, Michigan’s Matt Rose really loved his 2012 Kia Optima. He said it delivered great gas mileage for his 45-minute commute to work. He really loved that midsize car. But then it burned to a crisp on February 28 this year. He described his beloved 2012 Kia Optima to the Detroit Free Press, as a “big toasted marshmallow”.
Oh.
Matty said seeing a car burst into flames for no apparent reason was a new experience. As you would. But it turns out Matty isn’t the only Hyundai or Kia driver to see their car become the 21st century version of the burning bush on Mount Horeb.
The US National Highway Traffic Safety Administration will open an investigation into 3 million Hyundai and Kia cars after reviewing reports of more than 3000 fires that injured 103 people. A group of US states is investigating Hyundai and Kia for potential unfair and deceptive acts related to reports of vehicle fires.
But wait, there’s more. Hyundai is recalling about 20,000 Veloster vehicles in Canada and the US because of the risk of the sporty model spontaneously bursting into flames but without the religious and tribal benefits of the Mount Horeb bush. Safety warning: God got Moses to take off his thongs before looking at the burning brambles but you should remain fully clothed.
However, one of Australia’s true Renaissance persons, Jack Absalom (forget former PMs, just look at Jack’s bio), who died in his beloved Broken Hill last month, always said carry a slab in your car for safety reasons. “If the car catches fire you can use a beer can as a fire extinguisher.” Jack, if you’re reading this up there, I have faithfully followed your advice for 30 years and as a result have never had a fire in any of my cars.
The US government authority raised issues with high-speed stalls and non-collision fires with Hyundai in December, and last month NHTSA issued the recall.
NHTSA documents show more than 6 million vehicles since 2015 have been affected. This week, a Kia spokesman told Nine-Fairfax there had not been any instances of the engine fires witnessed in the US with Australian Kia models, and confirmed the ACCC had not contacted Kia regarding the issue.
The spokesman said the Theta II engine at risk of fire in the US models was primarily manufactured in the US, whereas the Theta II in Australian models was made in South Korea. Hmmm. That’s strange, because the official recall document (Part 573 Safety Recall Report 19V-204) cites “certain Model Year 2013 Hyundai Veloster vehicles equipped with 1.6 litre turbo engines produced (from April 26, 2012 to October 16, 2013 by Hyundai Motor Company at the Ulsan plant in the Republic of Korea”.
In November, US federal prosecutors launched a criminal investigation into Hyundai and Kia to determine if vehicle recalls linked to engine defects had been run properly and South Korean prosecutors are also investigating the automakers over the recalls, raiding their offices and summoning executives for questioning.
Have you heard about this from our protectors in the government? Of course not. As you know, it’s not limited to the Koreans. We have had emails from more than 100 readers on the Mazda CX-5 and some other Mazda models with engine fails and park brakes that don’t work.
The system works against consumers unless they are well off and can afford to take manufacturers to court. The ACCC is impotent on many of these issues. Consumer tribunals like VCAT are impotent in the face of manufacturers who, like Mazda, will use lawyers before and during the hearings (which they are not meant to do), and Range Rover, who will take complaining consumers to court. Governments don’t care and there is no effective consumer lobby.
Only a royal commission into the car retailing industry looking at all the pain points for owners, including servicing and the cost of parts, will get some results. All of the answers will include transparency and commission-ordered discovery of documents, which manufacturers can’t ignore as they do now.
