IADA is Your Advocate for the Franchised Dealer Model
Show ponies like Tesla Motors, Rivian Automotive, and Lucid Motors bypass the Illinois Motor Vehicle Code and the Illinois Motor Vehicle Franchise Act to sell their vehicles directly to consumers. There are literally hundreds of new manufacturers in China and all over the globe trying to work their way into the U.S. market with a direct sale model. Through it all, IADA is your workhorse defending hard-earned rights under Illinois law. IADA welcomes the prospect of new manufacturers with innovative products entering the market. However, it is important that all motor vehicle manufacturers use franchised dealers, with the inherent benefits that a franchised dealer model provides to the public at large.
Almost 30 years ago, IADA sponsored legislation to create the Illinois Motor Vehicle Review Board, which is the administrative body that presides over disputes arising under the Illinois Motor Vehicle Franchise Act. Creating the Motor Vehicle Review Board has provided dealers with a fair, cost-effective forum for resolving Motor Vehicle Franchise Act disputes.
Over the past 3 decades, the Board has reviewed a host of Franchise Act provisions, including warranty reimbursement, termination, and relocation disputes.
In addition to the creation of the Motor Vehicle Review Board, dealer support of IADA and IADA programs like CVR, Ethos, and Federated has enabled IADA to support the franchised dealer system in a host of other ways.
Direct Sales
IADA is the primary funding source in the dealer lawsuit against Rivian’s and Lucid’s schemes to sell directly to consumers. Motor vehicle dealers are highly regulated, which benefits consumers. Manufacturers who sell directly to the public simply cannot be regulated as closely. IADA is backing the lawsuit against direct sale manufacturers because it is good for consumers, good for dealers, and good for manufacturers.
Bypassing the franchise dealer model is anti-competitive and harms consumers by eliminating price competition on vehicle prices and service. Franchised dealers also provide a convenient source for competitive financing.
In addition to making vehicles more affordable, franchised dealers are an effective consumer advocate to make sure that warranty and recall repairs get done, and done right, at no cost to the customer. When a vehicle needs a warranty or recall repair, the manufacturer pays for it, not the customer. Franchised dealers advocate for customers to make sure that the manufacturer approves the repair.
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On the other hand, when the manufacturer and the dealer are the same entity, the dealer is not likely to push for warranty and recall repairs to get approved. In fact, Tesla has been credibly accused of deceptively avoiding its customers’ warranty claims in an effort to keep its expenses down.
Dealers are the most efficient distribution model for new vehicles. After all, franchised dealers are their manufacturer’s’ first customers. Dealers purchase inventory from manufacturers and bear the cost of displaying and delivering vehicles to retail customers, freeing up capital for manufacturers to invest in vehicle development.
Ford Model e Protest
IADA also backed a successful Ford dealer Motor Vehicle Review Board protest to challenge Ford’s Model e modifications to the Ford dealer agreement. Ford’s “Model e” would have conditioned dealers’ opportunities to sell and service electric vehicles on dealers purchasing over $1 Million in EV charging equipment, including publicly available chargers operated during non-business hours, giving up control over pricing of new EVs and trade-in valuation, using Ford software to advertise and schedule service for EV’s, and offer home delivery of vehicles and home EV service.
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In short, Ford used Model e to try to make dealers mere delivery agents as part of a transition toward a direct sale model. Support of IADA from the Illinois dealer body in general, and specifically by the protesting Ford dealers, stopped Ford’s unlawful modifications to the dealer agreement and is vital to stopping manufacturers from eroding the franchised dealer system.
Volkswagen Lawsuit
IADA has also been consulting with the Attorney General’s Office on its Motion to Dismiss Volkswagen’s lawsuit challenging the Illinois warranty reimbursement law. The Illinois warranty reimbursement statute has been an important tool to level the playing field for dealers and manufacturers and has made it possible for dealers to get fairly compensated for warranty and recall repairs. The warranty statute has led to increased pay for service technicians and is an important tool for dealers to retain skilled employees.
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As you can see, IADA is laser-focused on maintaining the franchise system for the mutual benefit of manufacturers, dealers, and consumers. Your support of IADA over the past 104 years has helped us to pass the Franchise Act, Vehicle Code, and Sales Tax legislation and has helped us step in when dealer rights need to be litigated. We will never take your support of IADA for granted, and we will always defend the franchise model.
