The recently passed House Bill 637 in Florida, signed into law by Governor Ron DeSantis, has generated attention due to its impact on direct-to-consumer car sales. The law aims to prevent automakers from selling vehicles directly to consumers without going through independent dealerships. However, there is an interesting exception to this rule: the law does not apply to automakers who did not have pre-existing franchise agreements in the state, such as Tesla.
According to the language of the law, automakers, licensees, manufacturers, importers, distributors, and their representatives are prohibited from owning, operating, or controlling a dealership if they have already entered into franchise agreements with independent dealers in Florida. This effectively blocks legacy automakers from selling their vehicles directly to consumers through factory stores, similar to laws found in other states.
However, the Florida law differs from those in other states by leaving a loophole for companies that do not have franchise agreements in place. This exception creates a potential advantage for electric vehicle (EV) brands such as Rivian, Lucid, and Tesla. For example, under this law, Tesla can sell its Model 3 directly to consumers at a fixed price, bypassing dealerships, while other automakers like Ford would have to rely on dealers for retail pricing of their vehicles, like the Mustang Mach-E.
Additionally, HB 637 prohibits automakers from mandating specific prices for vehicles sold through franchise dealers. It also requires manufacturers to maintain consistent vehicle allocations to dealerships, ensuring they receive similar inventory levels as before. These provisions may limit automakers’ ability to prevent dealers from imposing excessive markups on popular vehicles. The law also conflicts with Ford’s plan to implement no-haggle pricing starting next year, which would be affected by the requirement to use franchise dealers.
The impact of this law has attracted attention from various stakeholders. Stellantis and Ford, both based in Detroit, have yet to respond to inquiries about the law. General Motors, on the other hand, has stated that it values its relationship with Florida dealers and will continue to comply with the law while supporting its customers.
Overall, the passage of House Bill 637 in Florida restricts direct-to-consumer car sales for most automakers, but not for those without existing franchise agreements in the state. This unique provision creates an advantage for EV brands like Tesla, while potentially impacting legacy automakers and their dealership relationships. The law’s provisions regarding pricing and vehicle allocations also present challenges and conflicts for automakers, particularly those planning alternative sales strategies.
Source: Florida Politics
