Trade associations have warned Ford that it is undermining the franchise system | Daily News Byte

Many dealers feel the franchise system is under attack following the announcement of Ford’s aggressive new EV policy. The policy would require significant investment from its franchised retailers and lists additional requirements that some feel could be too oppressive to rural businesses. The Southern Automotive Trade Association Executives (SATAE) sent a resolution letter containing their concerns to the automaker following its decision. Today on Inside Automotive, anchor Jim Fitzpatrick sits down with a panel of SATAE members to discuss what this could mean for dealers and what they hope the letter will accomplish. He was joined by Jason Wilson of Kentucky, Greg Kirkpatrick of Arkansas, Marty Milstead of Mississippi, and Jared Wyrick of West Virginia, each President of their state auto dealers associations.

What are Ford’s requirements?

In their letter, the association focused on four new Ford franchise requirements.
1: Dealerships are asked to make a $1.5 million investment in Ford’s EV programs without an allocation commitment (an inventory guarantee).
2: Alternatively, car dealers can make a $750,000 investment but risk losing their listing on the car maker’s website, a valuable resource for customers, and receive a limit on the number of cars they can sell. This option also has no allocation commitment.
3: Failure to meet any of these requirements will result in dealerships losing their license to sell any Ford products, including gas-powered vehicles in circulation.
4: Finally, Ford will require all participating dealerships to install public charging stations, which can cost upwards of $1 million dollars to install.

What’s in the letter?

The association believes it is important to present a united front to Ford, even though each association has different regulations and requirements. The letter represents the diverse perspectives of board members and focuses on shared franchise issues among all involved states.

Why is Ford’s decision bad for consumers?

The board believes the new rules will hurt markets across the state, but especially in the south. This is because Ford’s decision will affect low-income consumers, truck buyers and SUV buyers, who happen to be the customer base for many rural dealers. EVs, both at this stage and for the foreseeable future, are expensive, lack the driving range and carrying capacity of heavier gas-powered vehicles, and require more maintenance than other vehicles. While the panel fully acknowledges that electric vehicles will dominate the market, they emphasize that rural parts of the country will be slower to transition than urban areas due to various economic needs. Unfortunately, the panel believes the automaker stands to gain more if rural markets make the transition quickly because electric vehicles are expected to generate revenue only when adoption matches in production. Moreover, the board believes the automaker can accelerate this transition while reducing risk to itself by offloading some of the financial burden to dealers. Ford’s policy decision is therefore less reactive to consumer needs, and rather more calculated, aiming to influence market trends in its favor.

Why is Ford’s decision bad for dealerships?

Dealers who choose not to invest in Ford’s EV strategy using one of the two options will likely be forced to close according to the panel. Ford has suggested that those who make this choice may not have their franchise contracts renewed. Meanwhile, the board believes that dealers who invest and acquire higher EV stocks will not be able to sell their vehicles because their markets have not yet caught up. The panel warned that many dealers in the south may not see a return on their investments until their customers show interest, which may take longer in rural markets. Finally, the installation of charging stations presents new costs to participating dealers.

Why is Ford’s decision bad for the market?

Ford made this announcement at a time when supply was low, but demand was high. The resulting price hikes and low inventory have deterred consumers interested in EVs from following through with their purchases. Unfortunately, many southern dealers are unable to lower the price tags as they struggle to meet Ford’s demands. In fact, Greg Kirkpatrick says dealers are expected to incur at least a $500,000 loss over the next four years as a result of EV adoption. Forcing mass adoption before solving supply chain issues will exacerbate this affordability crisis.

How does Ford’s request differ from others made by similar brands?

Other car makers have requirements that may seem overwhelming for dealerships. For example, dealers are often required, on their own dime, to tear down and rebuild their facilities to keep up with their contract holder’s branding. However, such stipulations are mutually understood and agreed to in advance by the franchisee. Some automakers, such as Nissan, have even introduced programs to assist their retailers in the EV transition by introducing consumer-friendly warranties and protections. However, Ford is using EVs as a wedge issue, violating existing agreements enforced by dealers to force the adoption of new policies. The panel argues that Ford should not have taken the nuclear option.

What does the letter do, and what should happen next?

The panel agreed that the priority for dealerships should be to make sure their agreements are followed and their interests are heard. Part of that means asking Ford to fully explain its reasoning for the requirements, how it expects dealers to make a profit over the next decade, and how it will honor the contracts it has agreed to. The automaker will also need to explain how their new policy is not anti-consumer, especially to those living outside urban areas.

The automotive landscape has radically changed following the global call for greener transportation, increased public spending on energy infrastructure, and record profits from EV manufacturers. However, public confidence in the technology, aggressive goal setting from the industry, lack of support for franchise locations and a near-outdated energy infrastructure have put dealerships in a difficult position. Whatever happens next, SATAE members, along with other industry experts, believe that the best way to avoid adversity is to ensure that all sectors of the automotive community have input into the future of their industry.

Did you enjoy this interview? Please share your thoughts, comments, or questions about this topic by connecting with us at newsroom@cbtnews.com.