Dealer associations in at least 13 states say Ford Motor Co. is unfairly burdening its retail network with costly requirements for electric vehicle sales and breaking some franchise laws.
Officials in Pennsylvania, Virginia, North Carolina and other states have written to Ford calling for significant change to one of CEO Jim Farley’s signature initiatives, which would require dealers to invest up to $1.2 million on chargers, staff training and new sales standards to overhaul the retail experience.
Dealers can choose to spend $500,000 instead but would be allowed to sell no more than 25 EVs a year. Some of the state associations contend that such a cap is illegal.
The program “fails to make all vehicle models available to dealers on comparable terms and fails to allocate equitable quantities of EVs to Ford franchised dealers relative to their assigned market areas,” members of the Southern Automotive Trade Association Executives, which represents 12 state dealer associations, said in a resolution.
The group called on Ford to “work with state association executives and franchised dealers to create a program that complies with the state laws, promotes competition and furthers the goal of EV adoption in all parts of the country.”
John Devlin, CEO of the Pennsylvania Automotive Association, said in a letter to Farley that the certification program “violates multiple provisions of Pennsylvania law.”
Ford told Automotive News it’s confident the plan is legal and that “overall feedback has been positive.”
“The Model e Electric Vehicle Program was designed to deliver an unparalleled purchase, service and ownership experience for customers,” a Ford spokesperson said in an email. “Ford engaged with and listened to around 400 dealers in developing the program, which provides flexibility both in terms of enrollment level and timing.”
The automaker set an Oct. 31 deadline for dealers to select their investment level but postponed it to Dec. 2 after dealers asked for more time. Dealers can decide to not participate but would be limited to selling only gasoline and hybrid models starting in 2024.
Tim Hovik, chairman of Ford’s National Dealer Council, said he understood the state associations’ positions and suggested that the program still can be modified before taking effect. He noted that Ford held dozens of meetings with dealers whose stores vary in size to try to craft the best possible solution.
“Council is — ‘supportive’ might be too strong a word — but on board with where the company’s going,” Hovik told Automotive News. “The evolution of where we finished versus where we started was a direct result of dealer input. We’ve got a really good blueprint, but there are a couple flies in the ointment that we’re going to have to work our way through. I feel there are pieces of what we rolled out that are very useful and can be effective, but I also think there are a lot of pieces that can have tweaks.”
Don Hall, CEO of the Virginia Automobile Dealers Association, lauded Ford’s goals of making prices consistent and transparent, and of improving customers’ buying experience.
But Hall, who signed the Southern states’ resolution and sent a separate letter to Ford on behalf of Virginia dealers, said franchise laws don’t allow an automaker to give less inventory to dealers who spend less on chargers and other equipment.
Virginia “passed laws years ago to make it abundantly clear that if you’re a dealer, then you’re entitled to your fair share of mix and quality as any other dealer is of your size,” Hall said.
Robert Glaser, president of the North Carolina Automobile Dealers Association, which also signed the resolution and sent its own letter to Ford, said dealers who don’t see a need to spend money on chargers shouldn’t lose access to part of the brand’s lineup.
“We believe if you’re a Ford dealer, you’re a Ford dealer,” he told Automotive News. “You should be able to sell all the products Ford makes.”
Hovik said the company and dealer council worked hard to create a fair system, which includes a second opt-in date in 2027 for any dealers who choose to sit out now.
Ford originally did not envision a lower investment tier to allow EV sales, even in a limited capacity, executives have said, but added the option after discussions with dealers. Hovik declined to say whether the sales cap for the $500,000 Model e Certified tier was Ford’s idea. Those who join the higher tier would be called Model e Certified Elite.
“If a dealer spends two to three times to be an Elite-certified dealer, there has to be something in it,” Hovik said. “Logically, they should get some type of reward in the business plan versus a dealer who will be part of it, but at the lower level of investment.”
Hovik said he has spent many “sleepless nights” thinking about the allocation issue.
“Did we get it right? I don’t know,” he said. “Are we going to continue to work on it? Absolutely.”
Most of a dealer’s investment would go toward charger installations.
Those in the higher tier will be asked to invest $900,000 initially, largely to install two direct current fast chargers, one of which must be public facing. They likely will have to invest $300,000 more to add a third fast charger by 2026. The lower-tier investment would mainly go toward installing one public-facing fast charger.
Association officials say those costs are excessive and that smaller dealerships would not get a return on their investment for years.
“We appreciate that Ford wants to develop an EV charging network across the country; we just don’t think it should be at our expense,” Glaser said. “It should be market-driven rather than a mandate.”
He said he’s not sold on Ford’s demands for dealerships to have public-facing chargers.
“You can charge your car in front of thousands of Walmarts, Targets,” Glaser said. “In the long term, what consumer is going to charge their car at a Ford dealership if you could drive down the block and charge in front of a Starbucks?”
Pennsylvania’s Devlin also is skeptical.
“I don’t think I’ve talked to a dealer who thinks the public’s going to come out in any significant numbers to dealerships to charge their cars,” he said.
Jason Cole, executive vice president of Cole Automotive Group, which includes a Ford store in Ashland, Ky., said the automaker should “go back to the drawing board” on the program. He’s particularly concerned with the profit margin structure on future EVs.
Cole said Ford has indicated that he would lose 2 percentage points of guaranteed margin over the first two years of the program unless he meets certain requirements. He said Farley has stressed that margins will decline and that Ford dealers should sell customers subscription services to compensate.
“I think it’s very important that every state association really goes to fight this,” Cole said. “I think all the other manufacturers are looking at what happens here. If Ford gets by with this, I think every manufacturer will follow suit, and it could potentially be the end of the franchise dealer.”
State association officials didn’t rule out legal action if Ford won’t address their concerns, though many were optimistic the two sides would reach a palatable agreement.
Hall, at last month’s Automotive News Retail Forum in Chicago, said his association and likely others “are going to be very aggressive in ’23,” introducing legislation to strengthen state dealer franchise laws. He cited the Ford EV program as one example prompting the need for such action.
Marty Milstead, head of the Mississippi Automobile Dealers Association, has alerted the state’s Motor Vehicle Commission, which enforces state franchise laws, about possible violations in Ford’s program. The commission subsequently contacted Ford, which agreed to send representatives to Mississippi for a mid-November meeting on the matter.
After the commission issues a ruling, Milstead said, the dealer association will evaluate its options.
Ford and its dealers traditionally have had a strong relationship, and the company has been open to feedback in the past, such as when it paused a Lincoln-brand facility program before making changes based on dealer wishes.
North Carolina’s Glaser said dealers in his state are open to flying to Michigan for a meeting with Ford executives, though he had not yet heard back from the company on the request.
“Our Ford dealers are very appreciative of the partnership they have with Ford,” Glaser said. “They’re not upset, they just want to change the program so it works.”Lindsay VanHulle contributed to this report