As auto manufacturers announce plans to add ever more electric vehicles to their product portfolios, many also are requiring their dealer bodies to make substantial investments to prepare to sell those vehicles. In some instances, the manufacturer also is attempting to assume some aspects of the sales process previously controlled by the dealer.

Ford dealers in six states claim one such action, the Ford Model e Program, violates their rights, and have filed legal actions against Ford Motor Co. Most cases are ongoing but the majority of decisions that have been issued appear to support the dealers’ claims.

Dave Parker | CC BY 3.0

In September 2022, Ford said that dealers who wished to continue to sell and service Ford electric vehicles after December 31, 2023 would have to meet the requirements of its Model e Program. The program’s two levels – Model e Certified and Model e Certified Elite mandated installing a specific number of EV chargers and investing in training. Ford estimated the minimum investment to be $500,000. Dealers who didn’t make the investment would not receive EVs to sell.

Ford also set up a website through which dealers had to sell EVs and required the dealers to follow “no haggle” pricing. Ford also would control trade-in pricing.

Dealer associations in South Dakota, Illinois, New York, Florida, North Carolina, and Arkansas filed suits against Ford.

In South Dakota, the Office of Hearing Examiners in June ruled in favor of Ford. The Office conducts administrative hearings and issues decisions for citizens who have the right to a hearing before a state agency. It found that Ford had not modified the dealers’ franchise agreement and even if it had, Ford has shown good cause for the modification.

The Motor Vehicle Review Board in Illinois saw things differently, however. On November 16, it held in favor of the dealers, saying the Model e program did violate Ford’s sales and service agreement. Joe McMahon, executive director of the Illinois Automobile Dealers Association, called it a “home run” for his members.

The IADA led and financed the complaint by 26 of its dealer members because “it was clear to us (the Model e program) violated many aspects of the franchise act,” he told Getting to Go!

While Illinois dealers were unhappy about the investment in equipment and training, they were most upset about Ford’s usurpation of their right to negotiate price and trade in value, said McMahon. “At the end of the day, I think this whole Model e program was to eliminate the dealers,” he said.

McMahon doesn’t think the MVRB ruling is the end of the matter. “My guess is Ford will go to the courts,” he said.

New York dealers in November filed a complaint against Ford in federal court, alleging the Model e program was an unlawful violation of their franchise agreement. Besides not being voluntary (which Ford claimed it was), the program “is attempting to impose unfair pricing requirements, profit margin reductions, and require unlawful allocation of resources,” the dealers’ case states. “Ultimately, the Dealers argue that the Programs are an unlawful attempt by Ford to eliminate its Dealer network in order to sell its EVs competitively,” it says.

On September 20, the New York State Supreme Court ordered a stay on the Model e requirements while the case is being adjudicated. Ford asked that program documents be sealed but on November 30 the judge denied that and unsealed everything.

Arkansas and North Carolina dealers filed administrative complaints against Model e; Florida dealers filed in a federal court. Those actions are still pending.

Already, dealer complaints have produced some changes in the Model e program. Ford in November cut by half the amount dealers must invest in training. It also reduced the number of charging stations dealers must install and delayed by six months to June 30, 2024 the deadline for the charging stations installation. Ford denied the changes were a reaction to the Illinois ruling.

Sales of electric vehicles in the U.S. have lagged expectations and multiple auto manufacturers, including Ford, have announced a slowdown in the previously stated aggressive EV launch schedules. In October, Ford postponed by around $12 billion its EV investment plans.

Ford’s actions have already had an impact on its reputation with dealers, however. It was the least trusted automaker in the 2023 Kerrigan Dealer Survey, an annual survey by buy sell firm Kerrigan Advisors.

This article was written for Getting to Go, a buy/sell newsletter from Scali Rasmussen.