This year, dealer franchise law is a top priority for many state associations. Len Bellavia, founding partner of the law company Bellavia Blatt PC, also known as DealerLaw.com, joins us today on CBT Now to discuss proposed dealer franchise bills that would add or improve protections.
With the industry’s ongoing uncertainty, Bellavia declares “there are a lot of threats coming from the manufacturer.” Emphasizing that these criticisms undermine the franchise system’s credibility as a whole. In large part, he believes manufacturers may feel resentful towards dealers since they’ve had a good run. He continues, “their treasury is full, they’re happy, and less inclined to push back.
Bellavia believes that there is a philosophy, “that it’s all about EVs, but really it’s all about finding the right opportunity.” For instance, the EV push began with Tesla and the world believing that was a benchmark. However, Tesla doesn’t represent the traditional franchise system, so Bellavia asserts manufacturers may be taking a page out of their book. “It may be from the result of investor pressures trying to emulate the Tesla model but that ‘s only a small piece of the problem,” he claims.
The Agency Model
In Europe and Australia, the agency model has grown to be familiarly popular. To illustrate, an agency model is when the dealership’s emphasis shifts from closing deals and chasing sales volumes to serving the needs of the customer. However, in the U.S. that model can’t happen due to the numerous franchise laws put in place that highlight dealers’ protection and prohibits manufacturers from treating those franchise dealers as delivery centers.
"If I was a manufacturer, now is the time I'd say to take a run at dealers." — Len Bellavia, Esq
On the other hand, the most significant threat to the franchise dealer, according to Bellavia, is the over-the-air updates. Stating that “manufactures have been transparent and disclosed its a $25 billion a year potential revenue stream from charging customers.” But Bellavia argues, “they are charging the customer almost twice.” In retrospect, the $25 billion comes from franchise dealers and fixed operations, and if these bills become law, the dealer associations’ main concern would be to determine what updates are acceptable and practical for them to make while maintaining a vehicle’s functionality and safety should be the responsibility of the dealers.
Currently, manufacturers have been attempting to side-step dealers in a way that takes away revenue from the franchises. Especially when it comes to retail warranty reimbursement. Bellavia believes that “in spite of the laws put in place,” manufacturers still challenge dealers on things like customer pay rates and repair quality.
Although there is always the temptation to take advantage of an opportunity that is in front of you, Bellavia believes that dealers who have a vision and hope for multi-generations are more long-term conservative. Whatever the case, franchises are trying to make up for the excessive overhead costs that manufacturers have placed on them, like being underpaid. Therefore, when looking at the Ford EV program, Bellaviva questions how dealers are supposed to recoup their costs unless they can guarantee warranty repair
