As everyone knows, warranties are very much part and parcel of new car ownership, and for good reason – they reassure a buyer that if there’s a technical issue or a defective component, there is a guarantee that the car manufacturer will rectify the defect or replace a faulty item wihout cost to the buyer.

Of course, to be able to honour that warranty, a car company will deem it necessary that the car be maintained and serviced at an authorised service centre for the duration of the warranty. Car companies say this is to determine that everything is above board, that the vehicle hasn’t been modified or had substandard parts replaced by an external source, which would void coverage.

The downside to this is that a consumer is effectively tied only to an authorised network for the duration of the warranty, not just for service but also for car accident repairs, something that the Malaysia Competition Commission (MyCC) finds contention with.

In its latest Market Review Under Competition Act 2010 for Selected Transportation Sectors, which was revealed yesterday, the commission said it identified competition issues, as well as market concerns or regulatory issues in relation to the warranty claims for motor vehicles. It said that warranty restrictions imposed by car manufacturers may possibly prevent or limit competition in the car repair and service industry.

In terms of servicing, the review said that the exclusionary clauses in new car warranties could potentially lead to the market being foreclosed only to franchise (3S/4S) or authorised workshops within the car manufacturers’ network, reducing consumers’ choices and preventing competition from independent workshops.

The situation is amplified when it comes to accident repairs. Due to warranty restrictions, independent repairers are likely to face barriers preventing them from repairing new cars that are still under warranty, leaving franchise workshops within the car manufacturers’ network as the only choice in these cases.

It cited PIAM Approved Repairers Scheme (PARS) as an example. For accident repairs, OEMs would allow car owners to send their vehicles to PARS workshops appointed by PIAM, where repair works are strictly meant for accident repairs. Workshops have to meet criteria such as standard of service, quality, professionalism, competency and skill that typically have considerable capital investment before qualifying for a PARS certificate.

Given that PARS workshops should be on par with franchise workshops in terms of skill, competency and equipment levels, customers should be free to choose between these workshops. However, this is not the case in practice, the commission said in its review.

The MyCC found that certain vehicle manufacturers and certain insurance companies have entered into agreements and partnerships stipulating a set of KPIs that insurance companies need to adhere to by directing a certain number of insured new cars to franchise workshops. The commission added that due to the KPIs of the agreement, insurance companies may expend efforts to encourage consumers to engage the services of franchise workshops.

In cases where consumers still choose to send their new cars to a PARS outlet (or an independent workshop), there have been instances where consumers were asked to sign indemnity letters. In these letters, it was stated that the vehicle owner was fully aware that he or she was engaging the services of an independent workshop, and that the entire manufacturer’s warranty would be voided as a result.

This, MyCC said, potentially creates pressure for the vehicle owner to engage only the services of workshops within the authorised network.

In light of all this, the commission has come up with eight provisional recommendations to address what it says are identified impediments in maintaining and promoting competition in the motor vehicle warranty market.

The main provisional recommendations include reviewing the current warranty clauses that restrict customer choices in the vehicle service and repair market as well as the unbundling of maintenance and service plans.

It added that it is looking to get relevant stakeholders to engage with car manufacturers to encourage them to remove restrictive warranty clauses and not make warranties conditional on the repair and servicing of a vehicle within their network.

The commission said that these interventions in the motor vehicle warranty market are likely to have far-reaching benefits, opening it up to more competition, thus benefiting consumers. How much actual change that will come about remains to be seen, but at least the intent has been stated.

What’s your view on vehicle warranties in Malaysia, and what other measures would you like to see being implemented? Share your thoughts with us in the comments section.