Volkswagen and General Motors Take Different Position on Electric Vehicle Distribution Agreements

Volkswagen dealers recently received The Battery Electric Vehicle Distribution Terms and Conditions Agreement (“BEV Agreement”) which is purported to be required before receiving Volkswagen’s new electric vehicle models. Likewise, GMC and Chevrolet dealers have received GM’s Electric Models Participation Agreement which requires dealer execution before being eligible to receive electric vehicles. VW and GM’s insistence upon execution of these electric vehicle agreements violate both the terms of the existing Dealer Agreement (“Dealer Agreement”) and state franchise laws.

These electric vehicle agreements create a separate dealer agreement for EV model vehicles apart from the existing Dealer Agreement. This is entirely inconsistent with the terms of the existing Dealer Agreement. In the VW Dealer Agreement’s section entitled “Standard Provisions” it provides at Article 1 that dealers are entitled to receive all “Authorized Automobiles.”  “Authorized Automobiles” is defined in Article 16 of the Dealer Agreement Standard Provisions as “motor vehicles of the Volkswagen brand . . . .”   Likewise, in GM’s Dealer Agreement’s section also entitled “Standard Provisions” it provides at Article 1 that dealers are entitled to purchase “Products” from General Motors. “Products” is defined in the Dealer Agreement as the brand (i.e. Chevrolet, GMC, etc.) of “Motor Vehicles, Parts and Accessories” for which the dealer has a franchise.

Because EV models will be manufactured by Volkswagen and GM, and will be sold under the Volkswagen, GMC and Chevrolet brand names, dealers are entitled to receive the EV model vehicles without being forced to enter into a separate dealer agreement. The Dealer Agreement already places facility, operating standards, special tools and sales promotion requirements on dealers as it relates to any Authorized Automobiles/Products which naturally include the EV model vehicles. Thus, Volkswagen and GM’s proper course of action is to amend its operating standards to include reasonable requirements for the sale and service of EV vehicles, not to insist upon the execution of a separate dealer agreement.

Likewise, almost all state motor vehicle franchise laws prohibit a manufacturer from refusing to provide all models produced under the franchise brand in reasonable quantities to dealers who have an existing Dealer Agreement for that franchise. Many states make clear that the refusal to provide all models to franchised dealers cannot be based upon a requirement to execute a separate agreement or to agree to unreasonable requirements associated with the new model vehicle. These EV Agreements clearly constitute a separate dealer agreement which purports to give the manufacturer the right to suspend delivery of EV vehicles if a long list of requirements, many which are currently unknown (i.e. “EV Readiness Standards”), are not met.  This is exactly the type of agreement state motor vehicle franchise laws are intended to prohibit.

Many dealers and dealer associations across the United States, much of which came from BSM clients, pushed back on the legality of these EV Agreements. Volkswagen and GM have had starkly different responses to dealers’ concerns. Volkswagen has announced that dealers will not be required to execute the BEV Agreement in order to receive the upcoming battery electric vehicles.  Instead, dealers will be required to sign the BEV Agreement if they desire the “additional benefits” offered under the BEV Agreement. Dealers will now have to make a business decision as to whether those benefits are fair trade-off for the obligations contained in the BEV Agreement.

GM, on the other hand, has responded to dealers concerns by simply stating that the Electric Models Participation Agreement is not inconsistent with the existing Dealer Agreement and does not violate state motor vehicle franchise protections. GM states that dealers have the “option” to choose whether to sign the EV Agreement and receive future EV models or forego that opportunity.  This is a false choice as dealers will have to have the EV models in inventory in order to be competitive in the marketplace. GM dealers should contact their experienced motor vehicle franchise legal counsel to discuss their options in responding to GM’s position.