NADA chairman defends franchise system at Automotive Forum

NADA chairman defends franchise system at Automotive Forum

In the wake of national publicity over Teslaês efforts to go around state franchise laws, NADA Chairman Forrest McConnell explained last week why the dealer franchise system is vital to the auto industry. He spoke at the 2014 Automotive Forum, presented by NADA and J.D. Power during the media days for the New York Auto Show.

Dealers helped pave the way for startup brands such as Honda and Toyota, McConnell said. Manning the pivotal retail position, dealers are as invaluable as they are indispensable to automobile business stakeholders, especially consumers. The franchise system keeps competition up and costs down for car buyers, said McConnell, a Honda/Acura dealer in Montgomery, Ala.

Addressing an issue frequently raised by Tesla proponents in the media, McConnell asserted that, –cutting out dealers would not lower car prices, because a factory-owned retail network would have to put in the same investment in physical assets and the same operating expenses that dealers now shoulder.”

Manufacturers retailing their own vehicles would have no competition. –Customers would be stuck paying the full sticker price because there would be no •same brand dealershipê to shop and compare prices,” said McConnell.

Dealers also play an important role in safety recalls, as thousands of GM vehicle owners are finding out. –GM dealers are getting ready to support their customers from New York City to Yuma, Arizona, at no cost to those customers,” McConnell said.

Meanwhile, Tesla failed in its effort to sell directly to consumers in Arizona when legislation to allow Tesla to open direct sales outlets didnêt clear the state legislature. Tesla vowed to return to fight the battle again next year in Arizona, as they announced plans to build a gigafactory expected to hire 6,500 people there.

Other states pondering the Tesla question besides Arizona include Texas, but Tesla has said state franchise laws will not affect the automakerês decision on where to build the factory.

Addressing an issue frequently raised by Tesla proponents in the media, McConnell asserted that, –cutting out dealers would not lower car prices, because a factory-owned retail network would have to put in the same investment in physical assets and the same operating expenses that dealers now shoulder.”

In the wake of national publicity over Teslaês efforts to go around state franchise laws, NADA Chairman Forrest McConnell explained last week why the dealer franchise system is vital to the auto industry. He spoke at the 2014 Automotive Forum, presented by NADA and J.D. Power during the media days for the New York Auto Show.

Dealers helped pave the way for startup brands such as Honda and Toyota, McConnell said. Manning the pivotal retail position, dealers are as invaluable as they are indispensable to automobile business stakeholders, especially consumers. The franchise system keeps competition up and costs down for car buyers, said McConnell, a Honda/Acura dealer in Montgomery, Ala.