State dealer associations like FADA are actively fighting new direct-to-consumer models from OEMs such as Volkswagen’s Scout Motors, aiming to preserve the traditional franchise system against legislative and legal challenges in the evolving automotive landscape.
State dealer associations still play a pretty vital role when it comes to defending dealers’ rights and keeping the traditional franchise model alive, especially now, with a lot of pressure from OEMs who are eager to reshape the entire automotive retail landscape. Ted Smith, who’s president of the Florida Automobile Dealers Association (FADA), emphasizes how crucial these associations are—they’re not just reactive but proactive advocates and watchdogs. They’re always thinking ahead, anticipating potential threats from OEMs, cooking up strategic responses, and stepping in early to protect dealers before issues get out of hand. Smith—who’s been in the game for over twenty years—really embodies a deep-rooted commitment to the franchise model, which supports both big, publicly traded dealership groups and small, one-point operators equally.
One of the biggest hurdles today is coming from OEMs trying to dodge state franchise laws by implementing new direct-to-consumer (DTC) sales models. Smith points out several examples that show this shift: Sony-Honda Mobility’s Afeela brand, Volkswagen’s Scout Motors, Hyundai teaming up with Amazon, and pretty fresh entries from Chinese automakers trying to find their footing here in the U.S. Florida, in particular, worries some, especially with insurance companies like State Farm and Progressive refusing to cover damage claims on loaner vehicles. That’s prompted FADA to push for legislative fixes—something similar to laws recently passed in Texas.
A pretty high-profile fight is brewing around Volkswagen’s subsidiary, Scout Motors. They announced plans to bypass the traditional dealership network and sell electric vehicles directly to consumers—a move that dealer associations across the country are fighting vigorously. The goal is to imitate Tesla’s direct-sales approach, offering clearer pricing and a simpler buying process. Volkswagen has invested heavily—about $2 billion—in a South Carolina plant scheduled to start production in 2027. They’re planning to roll out electric SUVs and trucks, including some versions with small gas engines for folks worried about charging infrastructure.
But this strategy runs afoul of franchise laws in several states, including Florida and South Carolina, where selling vehicles without involving independent dealerships isn’t allowed. NADA (National Automobile Dealers Association) along with state groups like FADA, are actively challenging Scout’s plans—taking legal action and trying to push legislative changes. Mike Stanton, CEO of NADA, has publicly criticized VW for this move, stressing that preserving the franchise system is key—it's what ensures competition and benefits local economies. On the flip side, Scout’s leadership argues that direct sales are crucial—they believe this model gives them control over the customer experience, profit margins, and overall quality.
FADA has been proactive in response, pulling together legal teams, consulting with dealers directly, and working with legislators to identify potential loopholes that OEMs might try to exploit. Smith recalls a standout victory back in 2007-2008, when FADA successfully fought to uphold laws that require reimbursement for warranty parts and labor—laws that were challenged on constitutional grounds by the Alliance of Automobile Manufacturers. That case was a big deal—it really showed how state associations can step in and protect dealer rights, setting standards that benefit the whole nation.
Looking ahead, Smith sees several hurdles on the horizon. Early 2024, FADA plans to join NADA in D.C. to oppose “right to repair” legislation that gets a lot of support from independent repair shops. It’s often advertised as a consumer-driven initiative, but Smith warns that the real agenda might be to make it easier to use non-OEM parts, which could cut into dealer revenue from parts and repairs. Plus, there’s the rising influence of online marketplaces like Amazon and eBay—these platforms could shake up traditional parts suppliers, and that, in turn, impacts dealership service departments. Environmental rules from the EPA are also a concern since they might force manufacturers to ration vehicles between internal combustion engine (ICE) and electric (EV) models, potentially messing with dealer inventories and sales strategies.
Oh, and Smith also mentions a recent letter from the Alliance for Automotive Innovation—a coalition representing nearly 15 automakers, including brands like Ford and GM that historically supported dealers. They wrote to the U.S. Department of Justice claiming that franchise laws are outdated and hinder competition, and limit consumer choice. Smith urges OEMs to publicly renew their commitment to the franchise system—remaining silent might suggest they’re switching sides or aligning differently, which dealers and associations need to be ready for.
At the end of the day, FADA’s top priority still is fighting Scout Motors’ efforts to sway state legislators, who are framing the franchise system as outdated and anti-competitive. They’re also supporting dealers caught up in ongoing legal battles with VW and Scout. Their stance clearly underscores a broader industry goal: keep the franchise model intact, because it’s what has historically fostered competitive, transparent, and locally rooted automotive retail—despite all these disruptive forces trying to shake things up.
Source: Noah Wire Services
