This article was originally published HERE
In the last two months, Automotive News and other publications have reported on tensions between automakers and their dealers. This doesn’t involve all automakers, but recent statements from a few have put many dealers, state and metro dealer associations and the National Automobile Dealers Association on high alert:
What is going on here?
Tension between automakers and their dealers is not new. There will always be differences of opinion on how best to take care of customers and win in the marketplace. In fact, automakers and dealers that address these differences head-on and have open dialogue regarding their resolution have proven over time to be the most successful.
Today’s tensions are different. They are not rooted in the conventional give-and-take over cost shifts or how the earnings pie is divided, but rather in threats that go to the very core of the franchise system that underlies the factory-dealer relationship.
When some automakers propose apocalyptic changes to their dealer networks — changes that could instantly erase billions of dollars of local investments — it puts all dealers on edge. Isolated actions by the few create mistrust in the entire system. It is difficult for dealers to consider requests to invest millions in new facilities or EV infrastructure if automakers are simultaneously toying with the idea of removing franchised dealers from their strategies.
A direct-sales approach suggested by a legacy automaker is not just a bad business strategy that would jettison the added value that a network of locally anchored, independent dealers demonstrates. It would also violate the laws of most states, and any automaker proposing it should expect state dealer associations, with NADA’s support, to vigorously assert and defend dealer rights under state franchise laws.
There is a better way, of course, one in which automakers and their dealers work more closely together, grow their collective businesses and provide an unrivaled customer experience. That’s why, in 2022, NADA worked with state associations, dealer councils and dealer leaders from around the country to create a framework for dialogue to address the biggest opportunities we face. The result was last fall’s launch of NADA’s Guiding Principles on Evolving Business Models and the Dealer Franchise System, which is available at nada.org/principles.
The words on the page are now being put into action. Dealers are having productive discussions with most automakers. In many instances, they are spending time debating the best approach to our age-old challenges, with different automakers and dealer bodies opting for different go-to-market strategies. What’s more, important new topics — like better approaches to data sharing and downstream revenue sharing and finding ecosystem efficiencies, to name just a few examples — are being added to the discussions.
Automakers appreciate that dealers are increasingly leaning into the dealer-factory relationship. And dealers appreciate the clarity that most automakers are providing by publicly committing to them and recognizing the competitive advantage they provide.
So let’s stop with the threatening rhetoric. It’s a distraction that takes time and effort away from what is most important. To win today, we need to be committed not just to strengthening our relationship, but to remembering that our words about that relationship matter every bit as much as our deeds.