No more raw deals

What customers need to know in the aftermath of the scandal of closed car dealerships – a report.

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Car show

Just as 2014 was coming to a close, shocking news trickled in taking everyone by surprise: The showrooms of two famous automobile dealers were shut down by the government for a month as a punitive measure allegedly for cheating customers. One of the closed showrooms was located on Salwa Road while the other was the Airport Road branch of another dealership. The agencies were accused of passing off to customers repaired and repainted vehicles as showroom-fresh in breach of the country’s consumer rights law.

What actually surprised many, including some journalists, was that the economy ministry which generally fights shy of naming and shaming outlets that are found on the wrong side of the law, announced the names of the dealerships whose showrooms were shut down. The ministry said in a statement issued on 13 December, 2014: “We found out these showrooms were selling cars damaged in accidents after extensive repairs and painting.”

On 14 December, 2014 local newspapers prominently carried reports of the showrooms’ closure with photographs taking many by surprise*, for such action was being taken by the government for the first time. Nobody knows if any such measure was ever taken against a local automobile distributor in the past, recent or remote. The agencies were the dealers for famous American and Japanese brands, the local media said.

“I hope the closure of the showrooms is not a mere publicity gimmick,” was how someone commented on social media, echoing the thoughts of many who were wondering if the closure was merely a publicity stunt by the Consumer Protection Department (CPD), the consumer rights arm of the government which is attached to the Ministry of Economy and Commerce, or a genuine one.

The action taken by the ministry wasn’t hasty. There had been complaints from buyers, and taking cognizance of them, the ministry put its inspectors on the trail of the two dealers. CPD inspectors are armed with judicial powers and can directly charge outlets for breach of consumer protection law. Then, a raid was conducted and the showrooms were found on the wrong side of the law. Inspired by the success of its clampdown, the ministry urged people to report suspected irregularities of this kind on its hotline (8005000).

The story doesn’t end here. A little later, the ministry shut down the showrooms of other dealers as well on similar charges. The ministry announced in a statement that in surprise raids on the dealers’ outlets its officials discovered that they were repairing and repainting damaged cars and passing them off as brand new to customers. There is no doubt the car dealers (provided the accusations are not unfounded) were not only violating the law, they were also doing something unethical and putting their reputation at risk for meagre gains.

Going back and forth

It is no hidden secret that the economy ministry and the car dealers have long been playing hide and seek. The former prime minister, in one of his annual interfaces with businessmen several years ago, cautioned local automobile distributors and asked them to bring car prices down on par with those in the neighbouring GCC states. People, he said, had been complaining that cars in other GCC countries were available at much lower prices than here.

As if taking cue, the CPD went after the dealers. Meetings were held with their representatives but to no avail. The dealers reportedly put their foot down and said since Qatar was a small market and the cars being imported complied with specialised specifications, they worked out costlier, and hence there was no way their prices could be slashed. The CPD kept silent for a while and then again went after the dealers, asking them to get their act together and smoothen out their after-sales service. On an experimental basis the CPD even set up a small representative office in the workshop of a car dealer and said it would open up more such offices. Little is known about what is happening on that front now.

The hottest news that broke early in March was that the economy ministry is taking its war with the car dealers to its logical end and preparing to eventually rein them in by fixing maximum prices of brand new vehicles.

In this regard, various automobile manufacturers the world over are being contacted to get details like how much a car costs when it reaches Qatar.

Once these figures are had, the ministry may fix an upper limit of profit margins for the car dealers, thus preventing them from manipulating car prices. Legal circles say that although Qatar is a free market, the government has the authority to control the prices of commodities and services to keep inflation in check or businessmen could go overboard and turn exploitative.

As regards the closure of the showrooms, little is known about what exactly happened. How the cars that were repaired and repainted by the erring dealers were damaged and why the company didn’t inform the customers who felt cheated and lodged complaints with the Ministry of Economy and Commerce.

These are some crucial questions that remain unanswered since the dealers haven’t come out with any clarification so far to explain their position. bq tried to get details but dealers insisted the matter was sub-judice, so speaking on the issue wasn’t advisable.

Rumours in the local automobile trade suggest these might have been new cars that were damaged while being transported from the port to the warehouse or to the showrooms of the dealers. Trade circles say car dealers collect the vehicles they import from the Doha Port and transport them in double-deck commercial-size car-carrying trailers to their warehouses.

According to Almana Motors, local distributors of several top brands of automobiles such as Dodge, Ford, Peugeot, Jeep and Chrysler, among others, when a car is sold the company orders it from its warehouse, which is some five to seven kilometres from its workshop.

“We deploy two tow trucks if we need up to three vehicles but if we need more, we use one of our double-decker trailers,” Nabil Al Saadi, sales manager at Almana Motors tells bq. Sometimes during transportation, accidents occur. According to Al Saadi, recently there was an accident while transporting a new car where the driver forgot to use the handbrake in a manual transmission vehicle and the vehicle was damaged. Traffic police investigated the incident.

Car lot

Fixing new cars

Al Saadi says each new vehicle has a temporary plate number, using which the vehicle is insured. For this, Almana Motors, for example, pays a lump sum of QR500,000 annual insurance premium that covers the agency and the customer. If a new car is damaged the traffic police report is submitted to the insurance company and its officials inspect the car and assess the extent of the damage.

But at no cost a new vehicle which is damaged while being transported can be repaired even if the damage is minor, he adds. A damaged car can’t be sold and if it is, the buyer must be told since the value of the vehicle has depreciated by five percent even if the damage is minor, claims Al Saadi. “There are standard procedures in this regard and they must be followed.”

Even if a car has a very small scratch or dent the buyer is informed and offered a discount of a minimum of QR 2,000. “If the buyer doesn’t agree, we change the vehicle if we have one in the same colour.” Al Saadi categorically says that if a new car is damaged while being transported it cannot be repaired until it is sold off and the buyer has been informed and agreed to take it.

New vehicles that are either damaged in accidents and not accepted by buyers, or those that have some technical faults are treated as used cars by the dealers and disposed off accordingly. Or they can be used for demonstrations (test drives) as well.

In case a dealer is selling a damaged new car to a buyer after repair, he will take pictures of the damage and of the car post-repair and the paint job and get the documents signed by the buyer so he cannot file a complaint with the CPD later, says Al Saadi. Sometimes it can happen that a new vehicle is sold off and the buyer comes back after a month or so and says the car was repainted.

He, thus, files a complaint with the CPD and the department refers the vehicle to a workshop for inspection and asks for a report. The CPD sends that report to the dealer and the latter, in turn, presents it to the traffic police, which determines whether it was a paint job before the vehicle was sold off or it met with an accident after its sale and was repaired and repainted, says the Almana Motors official. “It happens the customer forgot about it and came back to us to complain, we show him the document he signed,” says Al Saadi.

Some businessmen like Ali Hassan Al Khalaf argue that even though a car dealer may be at fault, the decision to punish it by shutting down its showroom or showrooms must be taken only by a court and not by public servants. ”

No public servant should have that right,” Al Khalaf, a former bureaucrat, told a local Arabic daily in remarks published on 2 January, 2015. It is interesting to note that Al Khalaf was director of the commercial affairs department of the very ministry (economy) more than a decade ago which is now involved in clampdown on the errant car dealers.


 

DAMAGE CONTROL

Transit damage may not have led to showroom closures in the UAE but there exists an underbelly of repair and sell, albeit at the bottom end of the market

By E. Shahid, Dubai

“General Motors has robust quality control processes in place to ensure quality at the manufacturing plant and at our dealers,” a spokesperson of the American automobile giant tells bq in a written statement. He was responding to queries regarding the possibility of cars with scratches being painted and passed on as new, as has been the case in Doha. The company maintains that transit damage is a concern for all automakers and is not specific to GM. “However, General Motors and our dealers have stringent policies in place meaning that any significant repair work will be declared to the customer,” the statement says.

That a company such as General Motors chose to respond at all – considering no such case has been reported in the UAE so far – points to the seriousness with which major auto industry players are responding to the challenge. This is a different scenario than what Doha witnessed, where the Ministry of Economy and Commerce not only issued commercial violation notices to scrupulous dealers but also closed down showrooms. Few similar reports have emerged from Saudi Arabia where a manhunt was on last month to nab a car dealer for his involvement in a series of financial embezzlement. Even that appears to be an isolated example of an individual operator resorting to unfair means.

It has been a familiar refrain elsewhere in the region barring the UAE, which has been a unique market in many ways. Just a few telephone calls establish the fact that the UAE automobile market is not just diverse but multilayered as well. If there are big players with well-entrenched dealer distribution networks there are also small fries who make decent money by dealing with cars at different stages of the value chain. The big ones are in it understandably for the long haul and ensure quality control at all levels while the fly-by-night operators don’t want to lose any opportunity to make a quick buck.

“For big players, it’s all about managing reputation while earning profits in the long run. There is no way they will compromise with the quality of their products and services,” says the proprietor of a major player in the used car market. He spoke to bq on the condition of anonymity. According to him, the UAE is too big a market for cars to be served fully by just the giant players. “You have a very large number of used cars (sometimes even total loss flooded ones) being imported here from the United States, Japan and other major countries. These cars are usually bought at auction houses,” he says.

A flourishing automobile industry has thrived in the UAE, which caters to repairing these cars and then reselling them in whichever market is deemed fit.

Typically the less damaged cars are consumed within the UAE. “The larger share of these cars makes it to other markets in the region and beyond. It used to be Saudi Arabia earlier but now there are stricter regulations for them and hence Africa has become the next big destination for these cars,” he says. The range of intervention, according to him, is huge; from minor scratches to complete overhaul. It all depends on the demand, state of the vehicle and the margin that it offers.

There is equal amount of risk as far as transit damage is concerned and is guided by various factors. “It depends on the shipping line, the number of cars being transported and on the total space hired,” he says adding that some kind of transit damage is always factored in by all stakeholders. “The transport authorities are concerned only with identifying the car. They only check and match the chassis number. From then on it is between the importer, the dealer and of course the consumer,” he says.

Car showroom
Pavel L Photo and Video

Innovative products

Even as manufacturers and dealers try to figure out a way to find a best practice related to damages, products are being launched to find solutions, sometimes innovative ones at that. The Car Care business at 3M recently showcased its latest innovations at the Automechanika event. A preferred choice there was the 3M automotive solutions to protect the vehicle against external damage and enhance the appearance of the vehicle. Another key innovation, the 3M Paint Protection Film, has been designed to protect vehicle from the damage caused by stone chips, insect debris, environmental elements and minor abrasions. 3M’s Scotchgard Vehicle Protection also offers protection against stains and common paint blemishes. There is no evidence to suggest though that products such as these help some dealers get damaged cars through the gate.

Irrespective of whether malpractices are happening or not, leading pre-owned cars dealers in the UAE routinely advise consumers to check the exterior paintwork carefully for fading, rust, dents and scratches. They say any waviness on the car surface or spots in the body paint indicates new paintwork. However, this is something an end user would expect while fishing for a used car. It’s not quite the same when you are gregarious and buying a new vehicle. According to one estimate, last year, the UAE’s organized used car market grew by 20 percent, and one company dealing with it, Arabian Automobiles, saw 30 percent growth in certified pre-owned vehicle sales.

On the growing trend of purchasing used cars within an organized car market, Michel Ayat, CEO of Arabian Automobiles, says they provide customers with the knowledge they need to make a smart decision. “They are becoming increasingly more aware of the comprehensive 145 check point assessment process our certified pre-owned cars go through,” he says adding that when buying a second hand vehicle, one takes a risk. With car buyers more frequently looking to shift to an organized used car market, Arabian Automobiles offers certified pre-owned vehicles across all of their showrooms in Dubai and the Northern Emirates.

Owing its sheer size, Saudi Arabia is a major market for automobiles and understandably registers buzzing activities in the aftersales market too. High business confidence and increased disposable incomes provide a favourable background for the automotive sector. “Saudi Arabia remains the largest importer of cars and automotive parts in the Middle East and has a market worth more than USD 22 billion,” says UAE-based German entrepreneur Saygin Yalcin who founded the SellAnycar business. “The Saudi automotive sector also has an expanding used vehicle market, particularly in terms of re-exports to the wider region. An increase of 35 percent over the past five years in used car sales in KSA makes that point very clearly,” he says. Industry players there, and elsewhere in the region, would only hope that unscrupulous dealers are kept at a distance.

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