Automakers flexed their muscles on just that point in 2014. In June, automakers said dealer opposition to Tesla's model had led state after state to propose laws tilting the legal balance in the dealer-automaker relationship too far in favor of dealers. The Alliance of Automobile Manufacturers, which represents 12 automakers but not Tesla, called it "understandable why Tesla or future competitors would want a simpler sales process."
But state laws allowing only Tesla to set up factory stores would put traditional automakers at a disadvantage, the alliance said. If Tesla is allowed unrestricted sales, the group argued, then all automakers should be able to sell directly. Those were fighting words to dealers.
The alliance also opposes legislation unrelated to Tesla, saying various bills overly favor dealers in other areas, such as warranty reimbursement. But state dealer groups retort that strengthening state laws is necessary to protect retailers from factory bullying and to preserve the franchise system.
"Every time we go to the statehouse and try to close a loophole, manufacturers find ways to avoid them," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers.
For instance, New Jersey and some other states prohibit manufacturers from charging back dealers when vehicles wind up being exported as long as the dealer ensured the vehicle was first titled in the U.S., Appleton said. In other words, a dealer who didn't know the vehicle was destined for export can't be punished if it's shipped abroad, say, as a gray-market import into China. But Appleton said many automakers, particularly the luxury makes, charge back the dealer anyway, sometimes for six- or seven-figure amounts, ignoring the state law. "Their attitude is: 'OK, sue me,'" he said.
NADA doesn't get involved in state legislative issues, but Welch offered to facilitate conversations between the manufacturers and the state dealer associations as tensions flared. The parties haven't taken him up on the offer. But Mitch Bainwol, president of the alliance, said the alliance is trying to work with Welch and NADA to find ways to work together with dealers on shared policy issues.
In an emailed statement, Bainwol said: "We all do better when we work together, and that's why the Alliance has engaged in ongoing discussions with Peter Welch on how we can take all the energy and resources used on franchise battles and turn it toward initiatives that strengthen the entire auto industry."
Appleton called unreasonable factory demands the biggest pressure point on dealers now. Requirements for facility upgrades, warranty reimbursement and sales incentive targets often don't make financial sense for dealers, he said. "When business is not so good, when a particular retailer winds up at odds with a particular manufacturer, the pressures can lead to a failure of the dealership."
Often, the disputes are over specific mandates. For example, Bill Cole, who owns seven dealerships in West Virginia and Kentucky, criticizes how manufacturers handle customer satisfaction measurements. "I don't want to put a sharp stick in the eye of the manufacturers," Cole said. "But gee whiz, I have full-time people who do nothing but manage the customer satisfaction scores, and I pay people based on customer satisfaction. And then, all of a sudden, we're pushing a number."
For AutoNation's Jackson, the sore point is stair-step incentive programs. The expectations are getting worse with more manufacturers entering the fray and setting tougher sales targets that dealers must hit to gain bonus payments, he said. The programs mean transaction prices on identical vehicles can vary from store to store by thousands of dollars.
The programs "introduce a level of mistrust in the marketplace that's just incredible, and it's the retailer that the customer takes their frustration out on," Jackson said. "They believe it's us that's created this game of three-card monte and hide the weenie. But it's really the manufacturer."