Overview
California recently passed a motor vehicle franchise bill[1] (“AB 473”) that places tight restrictions on automakers. With the bill—introduced at the behest of the state’s franchised new car dealers[2]—California has injected itself into a variety of hot button issues. The most significant provisions include:
- Post-Sale Subscription Limitations: AB 473 limits automakers’ ability to offer to consumers a subscription service for any motor vehicle feature that utilizes components and hardware already installed on the motor vehicle at the time of purchase and would function without ongoing cost to or support by the dealer. Consequently, automakers may need to re-think how to incorporate and sell these useful—and profitable—features.
- Electric Vehicle Facility Upgrades: AB 473 prohibits automakers from requiring franchisees to install publicly accessible DC fast charging stations unless the automaker pays at least one-half of all costs to install and maintain the stations. As a trade-off, the dealer must pay the automaker one-half of the net income generated from the use of the stations.
- Allocation Disclosures: AB 473 prohibits automakers from failing to disclose, upon request, the basis under which new vehicles are allocated to franchisees and the basis upon which the allocation is being made. Automakers spend considerable effort developing allocation systems to maximize sales for themselves and their dealers. This provision of the California law puts the state on par with other states that require disclosure of allocation methodologies upon request.
- Competition: AB 473 emphasizes the prohibition against automakers competing with dealers in the sale, lease, or warranty service of new vehicles. There are, however, certain safe harbors identified in the bill. For example, automakers may directly provide updates to motor vehicle software if the update is provided over-the-air at no cost without running afoul of anti-competition laws.
- Rights of First Refusal: AB 473 adds a condition to an automakers’ exercise of a right of first refusal: automakers may not use, or threaten to use, the exercise of the right of first refusal in bad faith.
Automakers should be on alert for similar laws to be introduced throughout the country. Barack Ferrazzano invites discussion on how automakers can navigate the shifting statutory landscape to position themselves for success.
[1] 2023 California Chapter 332 (Assembly Bill 473).
[2] Letter from Kenton Stanhope, Dir. of Gov’t. Affs., Cal. New Dealers Ass’n, to Cal. Governor Gavin Newsom, (Sept. 12, 2023), https://www.cncda.org/wp-content/uploads/AB-473-Aguiar-Curry-Signature-Request-Letter-to-Gov_FINAL.pdf.
