Virginia legislation aims to prevent direct sales, delivery agents

Legislation in Virginia aims to keep automakers from negotiating directly with consumers or going so far as to declare franchised dealers delivery agents.

A pair of identical bills passed unanimously in both Virginia's House and Senate late last month, and one of them may be headed for final passage as soon as next week, said Don Hall, CEO of the Virginia Automobile Dealers Association, which is backing the legislation.

The bill language may be some of the first in the country to reference growing concerns among franchised dealers that legacy automakers may try to take steps toward an agency model or sell directly to consumers.

Among its provisions, it prohibits automakers from negotiating binding sale or lease terms with customers, including online; retaining ownership of new vehicles until they're sold rather than selling them to dealers to hold in inventory; and declaring that dealers are delivery agents.

Virginia's bill language also includes a provision that prohibits automakers from unilaterally changing franchise agreements without also getting an agreement from the dealer.

"There's no line that says an agency model is prohibited in Virginia," Hall told Automotive News. "Everybody will tell you in America, 'We don't believe in agency models. We're never going to do an agency model.' "

State dealer franchise laws already prevent legacy automakers with franchised dealership networks from selling vehicles directly to consumers. Yet even if automakers publicly say they are not interested in turning dealerships into delivery centers, Hall said, the bill language is intended to bar them from attempting certain practices that circumvent dealers.

"The reason for all these various bullet points, if you will, is to make sure that we don't have anything that looks, walks or talks like an agency model," he said.

Hall said the legislation is not a direct response to Ford Motor Co.'s Model e program, which was rolled out last year and required dealers to invest up to $1.2 million on chargers and other equipment to sell the brand's future EVs. Late last month, Ford said in response to dealer pushback across the U.S. that it would change some of the restrictions on dealers who opted to invest less money.

"It's to send the message that the franchise system will stay intact and car dealers will have the option and the right to sell cars, and it's not going to be usurped by Ford," Hall said. "Indirectly, it certainly will touch Ford's program, but directly, it was not a bill designed to go after the Ford EV [program]. As I've told my dealers, whether or not you have huge customer demand for EVs or not, as long as the OEMs are committed to EVs, you, too, must be committed to EVs."

A spokeswoman for Ford did not respond to a request for comment by press time.

Hall said he began working on the legislation about six months ago, meeting with lawmakers and discussing the issues with Ford, General Motors and the Alliance for Automotive Innovation, the trade association that represents most major automakers in the U.S., before the bills were introduced in late December and early January.

Hall said that the bill language was amended to clarify some provisions at the request of GM and the Alliance, including that automakers would be allowed to display vehicle prices so long as the prices were set by dealers and that automakers can maintain a common stock of vehicles from which dealers can buy inventory.

A GM spokeswoman referred comment to the Alliance. An Alliance spokesman declined to comment on Virginia's bills other than to note that the trade association does not oppose the legislation.

Said Hall: "You have to be able to work with the other side at some level. ... Even on this bill, there's certain things I was unwilling to compromise on. But I'm willing to work and understand their position as we go through this process."