Dealer sues Nissan: Not enough cars for a nearby new store

Like most of the auto industry, Nissan is struggling to deliver enough new vehicles to its dealership lots. Why then, asks a metro New York dealer in a lawsuit, is a new Nissan store opening near his?

Dealer F. James Rourke, co-owner and general manager of Central Avenue Nissan in Yonkers, claims that by greenlighting an additional dealership, the brand is potentially exacerbating the its inventory squeeze.

The suit, filed in U.S. District Court for the Southern District of New York in late January, challenges the Japanese automaker for approving a competing dealership nearby even as it is unable to adequately supply inventory to existing stores.

The lawsuit alleges breach of contract and violation of state law aimed at protecting dealerships.

In an interview with Automotive News, Rourke expressed his frustration with Nissan.

"When you can't even supply the dealerships that you currently have with an ample amount of inventory, you're going to bring in a new franchise and give him additional inventory?"

A Nissan spokesman declined to comment on the litigation.

The New York Franchised Motor Vehicle Dealer Act restricts automakers from authorizing a new store within six miles of a same-brand dealership, Rourke told Automotive News last week.

The new Nissan dealership, at 450-460 Tarrytown Road in White Plains, N.Y., is 5.87 miles from Rourke's Central Avenue store, according to the lawsuit, which named Nissan North America Inc. and its finance captive, Nissan Motor Acceptance Co. as defendants.

Nissan has "deliberately taken steps to undermine Central Avenue's rights as a franchisee, including its right to operate without improper competition within its relevant market area," the suit alleged. "[Nissan's] attempt to invade Central Avenue's relevant market area without good cause is in flagrant violation of the Dealer Act."

The lawsuit seeks to block Nissan from moving forward with the White Plains store, which replaces a previously shuttered Nissan dealership. Central Avenue Nissan also is seeking unspecified damages, as well as attorneys' fees and costs.

"We would be in an unfair competitive position," Rourke said. "We own the property, we built a building from the ground up, so we have a huge investment here."

The lawsuit touches on a hot-button issue in factory-retailer relations.

It costs a manufacturer little to add dealerships, but it can be devastating to nearby same-brand dealerships that must compete for a limited number of customers, said dealer attorney Richard Sox, managing partner at Bass Sox Mercer of Tallahassee, Fla.

"Dealers have been told over time to build bigger and more expensive stores, making it harder and harder to obtain a return on investment," Sox said. "Cramming more dealers into a market only places additional stress on the existing dealers' balance sheet while not providing any real added benefit to consumers."

Central Avenue, a Nissan dealer for nearly two decades, described the factory's decision to OK another dealership at the White Plains location as "truly inexplicable."

Not only has Central Avenue Nissan "met and exceeded every customer need" in the market, but two other dealerships have previously failed at the proposed location, according to the lawsuit.

"Nissan regularly directs customers to bring vehicles in need of complicated or unique repairs to Central Avenue," the suit noted. "There is, therefore, absolutely no reason to open another Nissan dealership in Central Avenue's relevant market area."

In its lawsuit, Central Avenue Nissan raises a more topical sore point between the automaker and its retailers.

Nissan Motor Co., like its industry peers, has suffered from the global semiconductor shortage that has disrupted assembly lines. The automaker pulled about 130,000 vehicles from North American production in 2021 because of chip-related shortages, according to AutoForecast Solutions data.

In its lawsuit, Central Avenue Nissan said inventory is so low, it is often selling vehicles off the lot the day they arrive.

As of Feb. 1, Central Avenue Nissan had a 23-day supply of new-vehicle inventory. "Rogue inventory, our bread-and-butter SUV, is at a four-day supply," Rourke said.

The newly sanctioned competition, the suit argued, would add to Nissan's inventory shortage and worsen the impact on Central Avenue.

"The last thing Nissan needs right now is another dealership without sufficient inventory to meet customer demand," the suit alleged.

Manufacturers typically divert vehicle allocation to new stores to help the dealer recover startup costs.

"With production shortages leaving dealers struggling to meet customer demand," attorney Sox said, "the thought that a manufacturer would attempt to justify the addition of another dealer location is absurd."