By Marco Carbajal
In a significant development impacting both automakers and consumers, Florida Governor Ron DeSantis has recently enacted a new law that provides robust protection for traditional car dealerships.
What Does the New Florida Law Entail?
The law, signed on Monday, includes provisions that prohibit existing automakers with a dealership model from directly selling vehicles to consumers. It also mandates compensation for dealers for post-sale vehicle upgrades and safeguards them against manufacturer-set prices, should automakers choose to challenge profit margins.
Exemptions for Brands like Tesla and Rivian
Car manufacturers such as Tesla, Rivian, and others that already operate on a direct-to-consumer model without existing dealerships are unaffected by this law. The legislation specifically targets legacy automakers with established franchises to prevent consumers from bypassing dealerships in their car-buying experience.
“By doing that, we made a clear line between a manufacturer that has never had dealers and perhaps never will, and those that have relied heavily on their dealers to be their sales and marketing presence in Florida,” said Ted Smith, President of the Florida Automobile Dealers Association, in an interview with Automotive News.
The Florida Automobile Dealers Association argues that removing dealerships will result in higher prices for consumers and a decline in customer service.
Enhanced Protection for Dealers
Another provision in the signed bill offers additional protection for dealers seeking to maximize profits on car sales. It prevents automakers from dictating prices that dealers must adhere to, a move that some major automakers are considering as profit margins for hard-to-obtain vehicles soar. The legislation also requires manufacturers to distribute vehicles fairly among their franchised dealers.
Protection for OTA Updates
The new law also ensures that dealerships are compensated for over-the-air vehicle upgrades and activations. Instead of opposing the in-car subscription model, where automakers benefit from post-sale OTA updates, the law aims to safeguard the interests of dealers by requiring compensation for any electronic upgrades or activations performed by consumers within two years of purchasing a vehicle.
Meanwhile, original equipment manufacturers (OEMs) and industry trade groups strongly reject the notion that dealers should be compensated for services they are not involved in reselling.
Manufacturers Refuse to Compensate Dealers
“Manufacturers want to compensate dealers if they assisted a customer with an over-the-air upgrade,” said Wayne Weikel, Vice President of State Government Affairs for the Alliance for Automotive Innovation, in a letter to Governor DeSantis. “However, we completely reject the premise that distributors should be compensated for products they did not develop, sales they didn’t make, services they didn’t provide, and support they didn’t offer.”
An Anti-Consumer Law
It is difficult to deny that this move by Florida lawmakers appears to be anti-consumer. From avoiding dealer markups that have contributed to record inflation in recent years to potentially complicating the car-buying experience and increasing the cost of in-car software sales, there are several provisions that do not seem to directly benefit buyers. Instead, they prioritize protecting dealerships amidst changing industry trends.
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Florida Governor Ron DeSantis has signed a new law that provides strong protection for traditional car dealerships. The law prohibits existing automakers with a dealership model from selling vehicles directly to consumers and requires compensation for dealers for post-sale vehicle upgrades. This law targets legacy automakers with established franchises, while manufacturers like Tesla and Rivian, who operate on a direct-to-consumer model, are exempt. The Florida Automobile Dealers Association argues that removing dealerships would result in higher prices for consumers and a decline in customer service. The law also prevents automakers from dictating prices that dealers must adhere to and requires fair distribution of vehicles among franchised dealers. Additionally, dealerships will be compensated for over-the-air vehicle upgrades and activations.
Why were manufacturers like Tesla and Rivian exempt from the law, and how does this impact their ability to sell cars in Florida
Manufacturers like Tesla and Rivian were exempt from existing laws that restrict the sale of cars directly to consumers because they do not follow the traditional dealership model. These companies sell their vehicles directly to consumers without using independent dealerships as intermediaries.
The exemption provided a favorable environment for Tesla and Rivian to operate, as it allowed them to sell their vehicles directly without facing the restrictions typically imposed on traditional automakers. However, this exemption is specific to these manufacturers and does not apply to other automakers.
In terms of impacting their ability to sell cars in Florida, the exemption gave Tesla and Rivian an advantage over other manufacturers since they can operate their own retail outlets without having to involve independent dealerships. This direct sales model allows them to have more control over the distribution and pricing of their vehicles.
On the other hand, traditional manufacturers are required to sell their vehicles through franchised dealerships in Florida, which limits their ability to directly engage with customers and set their own pricing. This can potentially put traditional automakers at a disadvantage, as they have less control over their sales channels.
However, it’s worth noting that maintaining the exemption for Tesla and Rivian has faced opposition from auto dealers and some legislators who argue that these exemptions create an unlevel playing field and give certain companies preferential treatment. The debate surrounding this exemption continues, and it remains to be seen how it will evolve in the future.