Beyond the Lot: Key Insights From the NADC Fall Conference

Sales Effectiveness

After several years of landmark cases favoring dealers (e.g., Beck, Folsom, Santa Cruz), manufacturers have retreated from using sales effectiveness to exert control over their franchises. In its place have come a variety of efforts meant to exert control in other areas like discretionary allocation, tiered margin programs, framework agreements, buy-sell approvals, and add-point selections. Dealers need to be wary of OEM behavior in these and other areas now that sales effectiveness is not as potent a tool as it once was.

FTC Enforcement

The National Automobile Dealers Association (NADA) reports that despite no longer focusing on rulemaking under the current Administration, the Federal Trade Commission (FTC) is still active in enforcing existing laws regarding unfair and deceptive acts and practices, particularly on voluntary products. Transparency is the theme that runs through much of the FTC’s disclosure requirements so consumers can make educated purchases. This kind of transparency is exemplified in NADA’s “Know Before You Buy” sheet.  

Direct Sales

Litigation related to Volkswagen affiliate Scout Motors is winding its way through courts in Florida and California. The results in both cases will have a lasting impact on the franchise model in these states, every other state, and for franchisees across all motor vehicle brands. Some manufacturers have already made moves in anticipation of a favorable outcome for Scout. For example, Honda affiliate Afeela is already taking reservations in California from potential customers. Some dealers believe that taking reservations is part of the process of “selling” vehicles under California law.

EVs

In a trend that pretty much every dealer saw coming, NADA reports that there are still more than 140,000 electric vehicles (EVs) sitting on dealership lots that must be sold. This inventory will weigh heavily on dealer profits until dealers sell through all of it. That task will be more challenging without federal EV tax credits. Market preferences will not help either — US sales of battery-based EV’s are flat this year versus last year. Even regulators in California, where one in five new vehicles purchased is an EV, do not believe that they could have met the Biden-era EV targets for 2030.

Right to Repair

While automotive right to repair legislation exists in Maine and Massachusetts, it is still under consideration by Congress as a nationwide requirement. Both NADA and OEM-backed Alliance for Automotive Innovation continue to push back at this effort, stating that the issue is one for the states to decide. Additionally, NADA questions whether right to repair legislation is really needed, stating that 73% of all repairs nationally are performed by independent repair facilities.
 
If you have questions on this or anything else, please feel free to contact me. Have a great November!