For auto dealers, what happens in California rarely stays there. The state’s franchise laws are at the center of a national fight over whether automakers can bypass their own dealer networks to sell directly to consumers. A new federal pricing crackdown is forcing dealers in California and across the country to rethink how they advertise vehicles. And a wide-open governor’s race could reshape the agency that sets emissions standards, and EV mandates that the rest of the country follows.
Joining us on this episode of CBT Now to talk about all of that is Brian Maas, President of the California New Car Dealers Association.
Fight against VW/Scout escalates
The fight between Volkswagen dealers and VW’s Scout Motors’ direct-sales model is intensifying in California.
Earlier this month, a group of 14 VW dealers in the state filed protests with the California New Motor Vehicle Board, claiming that VW’s Scout brand is violating California’s anti-competition statute. That law bars manufacturers from competing against their own franchised dealers.
That protest is alongside a federal lawsuit against VW and Scout filed by the California New Car Dealers Association last year.
The protest was filed under AB 473, a California franchise law that prohibits manufacturers from launching a new vehicle brand to compete directly against their own franchised dealer network. Maas says that’s significant because, unlike in a federal lawsuit, the burden of proof doesn’t lie on the side that filed the lawsuit.
“VW has the burden to prove they’re complying with the law. We think that’s a very tall burden for them to meet in these protests,” Maas said.
The California case has the attention of dealers across the country. Maas says NADA is helping support the CNCDA’s federal lawsuit financially. Similar challenges have also been filed in Virginia and Florida.
"This is a potential existential threat to dealers. If VW gets away with this, who knows what GM, Toyota, Subaru … pick a manufacturer, decides to do in the future."
Maas says what’s especially frustrating to VW dealers all across the country is that they don’t have a pickup to sell, yet their manufacturer/business partner is creating a new Scout pickup truck and not offering it to them.
“There’s an attitude among some OEMs, certainly not all of them, that not only do we know how to make cars, we know how to sell cars better than our dealers do,” Maas said.
Navigating the FTC pricing policy
Dealers are also navigating a shift by the Federal Trade Commission in the enforcement of pricing disclosures and total price transparency.
The FTC sent letters to 97 dealer groups in March, warning that advertised vehicle prices must include all mandatory fees, with potential violations subject to enforcement action under the FTC Act.
Maas says they just had a similar debate in California under the California Cars Act. California lawmakers eventually decided that dealers could itemize certain charges separately and not include them in the total price.
Maas says the CNCDA has concerns about how the FTC announced this policy, without an opportunity to raise concerns and debate potential conflicts at the state level.
“We don’t think they’ve thought through some of the ramifications of these conflicting state laws,” Maas said. “We’re looking forward to conversations with the FTC through NADA and figuring out exactly what these rules are going to look like because I think there’s a lot of confusion.”
To help clear up some of that confusion, CBT News is hosting the Auto Leadership Summit on Fair Pricing and Compliance in Washington, DC, on June 16. The summit will bring together industry leaders, elected officials, and top retailers to address these challenges.
All eyes on the CA governor’s race
California’s June 2 primary could have lasting consequences for the auto industry. The state uses a top-two primary system regardless of party. The two candidates with the most votes face each other in November.
The next governor will appoint leadership at the California Air Resources Board, the agency that sets ZEV mandates and fuel economy standards that often ripple across the country.
“It’s possible that the next governor appoints leaders at CARB that try and reconstitute the agency in the future. So it’s a big deal,” Maas said.
Maas says California’s size and influence make the race one that the broader industry will be watching closely.
