And it's clear: More OEMs to come
November 24, 2023
On November 16, 2023, Amazon and Hyundai launched a strategic partnership that, as presented, will serve two purposes.
- First, the e-commerce giant will allow franchised auto dealers to sell vehicles on Amazon beginning in 2024. This is another way for dealers to build awareness of their selection and offer convenience to their customers.
- Second, Hyundai selected Amazon Web Services (AWS) as its preferred cloud-storage provider. In addition to being an online retailer, Amazon is a leading provider of data capabilities — computing, storage, database, and analytics, as well as artificial intelligence and the technology powering the “Internet of Things,” like applications found in cars and appliances. New Hyundai models will also come with Alexa built-in.
VADA’s analysis: Virginia dealers embrace innovative and modern sales techniques. At the same time, we understand the franchise system protects consumers, creates competition, and stimulates jobs and economic growth in our communities. Virginia has some of the best and strongest franchise laws in the country, and there is no regulation preventing dealers from using Amazon — or any web platform — to serve customers. In fact, Virginia dealers welcome innovative partnerships, especially with Amazon.
The agency model and direct sales of new vehicles by manufacturers are prohibited in Virginia and VADA will stand in strong opposition to any attempts to change or circumvent this law. We recognize many logistical questions concerning the Amazon partnership remain unanswered, but hopefully those issues will be ironed out in the Amazon-Hyundai pilot program, which begins in January. At this time, no Virginia dealers are participating in the pilot.
Here is why we are monitoring the partnership: Virginia franchise rules govern the relationship between OEMs and their dealers in many ways — some of which could be implicated by a program like that of Amazon-Hyundai.
In 2023, the Virginia General Assembly unanimously passed legislation brought by VADA to ensure dealers with existing franchise agreements remain the retailers of new vehicles. This move was done to continue fostering an industry with consumer protections and a fair and competitive marketplace. This law prevents a manufacturer from:
- Negotiating the price and terms of a sale or lease of a vehicle directly with customers
- Retaining ownership/consigning of vehicles until they are sold or leased instead of selling vehicles to dealers for dealer inventory
- Reserving the right to negotiate terms of sale or lease directly with consumers
- Reserving the right to offer or negotiate directly with consumers the sale of products like service contracts, guaranteed asset protection (GAP) agreement or waiver, or any other vehicle-related products and services
- Altering a franchise agreement to make dealers delivery agents
Laws on Leads
Virginia law prohibits an automobile manufacturer from discriminating when giving leads to franchised auto dealers. This law provides that dealers should receive the leads from their “relevant market area.” The OEM also should not be able to hold a dealer accountable for sales in an area or withhold potential sales leads from that area. Additionally, manufacturers are prohibited from conditioning lead distribution on the use of designated financing.
Prohibiting coercion to use Manufacturer Financing and Products
Virginia law prohibits an OEM from undermining competition in financing and other products by forcing dealers to offer only their financing or products. Dealers offer a wide variety of options to consumers. Manufacturers want to use their monopoly on new vehicles to force dealers to only offer their financing and other products to consumers.
E-commerce is wide open
There is nothing in Virginia franchise law to prevent dealers from using innovative e-commerce programs. Rather, laws prevent OEMs from using those programs to violate the franchise laws.
VADA and our legal partners continue to monitor the Amazon-Hyundai partnership to ensure the interests of our members and consumers are protected.
President and CEO
Virginia Automobile Dealers Association