How OEM EV programs impact the dealer franchise system — Zach Doran, OADA President

The OEM programs being provided to dealers are a hot topic that keeps raising eyebrows in the industry. While many people have chosen to participate, some state dealer associations around the nation are urging caution. Zach Doran, President of the Ohio Automobile Dealers Association, joins us to discuss his thought on these programs and where his association stands today.

With inventory levels rising, manufacturers’ initiatives are reappearing, some automobiles and franchises are selling better, and some dealers even have “left-handed inventory.” Overall, according to Doran, his association’s dealers are improving and doing better than they were during COVID. “As a whole, dealers are in good shape and ready to go. They are aggressively optimistic and looking forward to getting more inventory on the ground,” claims Doran. While some dealers believe their low floor plan and advertising costs provide them a competitive advantage, others disagree.

With the significant investments that OEMs like Ford are demanding for the purchase of EVs in dealers’ stores, it enables customers to be more involved in the sales process. Doran claims that “dealers have resulted in becoming an agency model.” The mission creed, he claims, “has been overlooked” for initiatives like Ford and Lincoln. Which indicated who is in control of the sales process. Additionally, to promote the franchise system, dealer groups, NADA, and state associations across the nation are fighting direct sales.

Promoting the Franchise system:
Doran says, “the franchise system is so good because OADA has talked a lot with legislators and policymakers about the sales process.” They further discuss how the franchise system is good not just for the manufacturers but for the consumers. As EVs grow more mainstream, the franchise system becomes more essential for state and local economies, citizens, and those looking for service-related repairs. 

Whereas, manufacturers are implementing some difficulties for dealers with their EV programs. According to Doran, “with the introduction of the Ford program, those are very expensive and there has been a lot of pushback because of it.” Additionally, he points out, there is ongoing litigation, so there is still the possibility for progress. OADA is making an effort to be a helpful partner, however, certain investments seem reasonable and some initiatives don’t. 

For instance, the ROI isn’t there, yet it might be justified in some states and metro areas. According to Doran, “there have traditionally been many OEM initiatives in Ohio that have benefited the larger dealers, but it doesn’t work for the smaller, medium-sized dealers.”

Collaborative efforts:
Doran notes, it’s imperative to create that open communication efforts through manufacturers and dealers to gather feedback. Through the states association, dealers can share the pain points of the manufacturers anonymously. “Today’s dealers are really under attack with the franchise law with Tesla, Rivian, and Lucid selling directly to the consumers, there are challenges there,” states Doran. 

Because of these difficulties, manufacturers want to have fewer owners or fewer pain points to have more control. In contrast to franchise dealers, Doran claims, “the direct sales approach does not offer excellent customer service or promote economic growth.”