Dealer Challenges to Ford EV Sales Requirements Continue to Mount, But Are Slow to Progress

In September 2022, Ford rolled out its “Model e Program” establishing requirements for Ford dealers who choose to sell and service Ford electric vehicles (“EVs”) after December 31, 2023. The Model e Program replaced Ford’s prior dealer EV certification program, Next Generation Ford EV Certification (“Next-Gen”), which imposed certain requirements, including the purchase of EV service equipment and installation of EV charging stations. Dealers opting-in to the Model e Program were required to enroll by December 2, 2022, and must become either “Model e Certified” or “Model e Certified Elite” before the program takes effect in 2024. While approximately 65% of Ford’s 3,000 U.S. dealers enrolled in the Model e Program, some dealers and state dealer associations are pushing back.

Model e Program Requirements

To become “Model e Certified,” a dealer must make an upfront investment of approximately $500,000, most of which goes toward the installation of fast EV chargers, including making at least one “Level 3” charger (with an estimated cost of $300,000 to purchase and install) available to the public during business hours. Ford will not provide Certified dealers with physical Model e vehicle inventory to stock or any demonstrator units.

To achieve the higher tier, “Model e Certified Elite,” dealers must invest an estimated $1 million -$1.2 million to meet program requirements, including the installation of three “Level 3” EV chargers and six “Level 2” EV chargers. Certified Elite dealers receive EV inventory to stock; access to rapid inventory replenishment; and access to enhanced repair and maintenance capabilities.

Both levels of certification require dealers to use the Ford.com e-commerce platform for all EV transactions and engage in transparent, “no-haggle” pricing. Elite dealers must also adhere to Ford’s Model e Minimum/Maximum Allowable Advertised Price program. All participating dealers also must invest in employee training, provide remote delivery of all vehicle purchases, and provide loaner vehicles for Model e service events.

Dealers and Dealer Associations Push Back

In response to Ford’s new EV sale and service requirements, dealers and dealer associations have filed legal challenges in six states – Arkansas, Florida, Illinois, New York, North Carolina, and South Dakota. These lawsuits and administrative protests allege that the Model e Program violates various provisions of each state’s franchised dealer statute, including that it (i) constitutes an unlawful modification of dealers’ franchises, (ii) imposes an unfair, inequitable, and unreasonably discriminatory system of allocation and distribution on dealers, (iii) unlawfully sets the retail price at which dealers may sell or lease EVs, and (iv) unreasonably requires dealers to make substantial changes to their dealership facilities. While most of these cases remain in their early stages, there have been a few key recent developments to report.

In South Dakota, the Office of Hearing Examiners issued a final order in favor of Ford on June 16, 2023, in Frontier Motors Ford, Inc. v. Ford Motor Co., HF No. DOR 22-11 (S.D. Office Hearing Exam’rs June 16, 2023). The six protesting dealers had previously enrolled in Ford’s Next-Gen program, invested $35,000-$50,000 to satisfy the requirements for receiving Ford EVs, and subsequently declined to enroll in the Model e Program. After a four-day evidentiary hearing in January 2023, the Hearing Examiner held that the petitioners failed to meet their burden to show that Ford modified their franchise agreements in adopting the Model e Program because, among other things, the Next-Gen program was “not part of the dealer agreement or the franchise documents.” The Hearing Examiner also found that even if a franchise modification had occurred, Ford had shown “good cause” for the modification because the Model e requirements were reasonable, and some even required to comply with South Dakota law. The Hearing Officer also found insufficient evidence that Ford “changed the competitive circumstances of any dealership” because “all Ford dealers have been given the same opportunities in the same manner.”

In North Carolina, a federal court rejected Ford’s attempt to remove an administrative petition filed by 46 dealers with the state Division of Motor Vehicles (“DMV”). The petition alleged that the Model e Program violates multiple provisions of North Carolina’s dealer statute, N.C. Gen. Stat. §§ 20-285 et seq. On July 18, 2023, the federal court in Armstrong Ford, Inc., v. Ford Motor Co., No. 5:23-cv-00167-D (E.D.N.C. July 18, 2023) granted the dealers’ motion to remand the case to the DMV because the proceeding was not a “civil action brought in a State court” within the meaning of 28 U.S.C. § 1441(a). Moreover, the court found North Carolina’s substantial interest in regulating and licensing motor vehicle manufacturers and dealers in the state outweighs any federal interest in providing a neutral forum for out-of-state defendants. Accordingly, the Court remanded the case to the North Carolina DMV, where it is likely to languish given the current backlog of matters pending before that agency.

The most recent case challenging Ford’s Model e Program, Fla. Auto. Dealers Assoc. v. Ford Motor Co., No. 4:23-cv-00282 (N.D. Fla.), was filed in Florida federal court by the Florida Automobile Dealers Association (“FADA”) in July 2023. FADA alleges that Ford has committed eight different violations of Florida’s dealer statute, including by (i) failing to provide reasonable quantities of EV vehicles to certain dealers and conditioning the delivery of EV vehicles on dealers’ compliance with unreasonable requirements, (ii) imposing an unfair, inequitable, and unreasonably discriminatory system of allocation and distribution on dealers, (iii) unlawfully modifying dealers’ franchises, (iv) unreasonably requiring dealers to make substantial changes to their dealership facilities, and (v) requiring dealers to publish or disclose their EV sales prices. FADA also asserts claims under new amendments to Fla. Stat. § 320.64(18) that took effect on July 1, 2023, which prohibit manufacturers from reserving specific vehicles for specific customers, from requiring or incentivizing dealers to sell or lease a specific vehicle to a specific customer, and from requiring or incentivizing a dealer to sell or lease a vehicle at a specified price or profit margin (or otherwise restricting the sales price).

Three additional actions filed in October and November 2022 – a state court lawsuit by four Ford dealers in New York, an administrative complaint by the Arkansas Automobile Dealers Association (AADA) with the state’s motor vehicle commission, and an administrative protest by 27 Illinois Ford dealers before the Illinois Motor Vehicle Review Board – remain pending. In New York, the dealers moved the court to enforce an “automatic stay” to prevent Ford’s implementation of the Model e Program, which they argue is required under N.Y. Vehicle & Traffic Law § 463(2)(ff) until the court renders a final judgment on the dealers’ claim that Ford unlawfully modified their franchise agreements. The motion is fully briefed, but no order has yet been issued. The Arkansas Motor Vehicle Commission has scheduled a hearing on the AADA’s complaint for October 4-6, 2023. And according to media reports, the protesting dealers’ hearing before the Illinois Motor Vehicle Review Board has begun and was expected to run through early August. The Board may take months to issue its decision once the hearing concludes. These challenges, and any still to come, will create ongoing uncertainty around Ford’s efforts to move forward with its national EV sales strategy.