Car Dealership Protection Bill Signed by Governor Ron DeSantis to Restrict Direct-to-Consumer Auto Sales.

June 21, 2023: In a move that has stirred controversy, Governor Ron DeSantis signed a bill prohibiting most direct-to-consumer vehicle sales in Florida. The legislation, known as HB 637, received support from lobbyists representing the Florida Automobile Dealers Association (FADA) and solidified the future of car-selling operations in the state.

The bill, which goes into effect on July 1, poses a challenge to Tesla’s business model, as the electric vehicle manufacturer sells its vehicles directly to customers online and through its own retail locations, bypassing third-party dealerships. However, a deal was negotiated by lobbyists, including Taylor Biehl and Jeff Sharkey from Capitol Alliance Group, to add language to the bill that allows Tesla galleries to continue operating.

The amendment explicitly permits newer manufacturers like Tesla, Rivian, and Lucid to obtain a franchise dealer license for direct sales of electric vehicles as long as there are no federal prohibitions. This carve-out does not extend to traditional manufacturers such as GM, Ford, Honda, and Toyota, even though they also produce electric cars.

HB 637, which received overwhelming support in the Legislature with only two “no” votes, prohibits manufacturers from reserving or incentivizing vehicle sales or leases, including those of electric or hybrid cars. It also forbids manufacturers from withholding vehicle supplies from dealers or dictating pricing, ensuring fair competition among dealers and benefiting consumers with better prices and services.

Proponents of the bill, like longtime FADA lobbyist Dave Ramba, argue that it protects consumers by maintaining the role of new car dealers as advocates for warranty work and service on manufacturer’s products. However, some economists and experts have suggested that loosening restrictions on direct vehicle sales could lead to lower consumer prices.

A 2017 study by Fiona Scott Morton of the Yale School of Management and Ann McDermott of Blue Sky Consulting Group highlighted concerns about state vehicle franchise laws favoring incumbent dealers and manufacturers.

The authors argued that states should allow manufacturers to choose their preferred distribution methods, promoting competition and giving consumers more options.

Critics of the bill have also raised concerns about political contributions from auto dealers to Florida politicians. Investigative reporter Jason Garcia highlighted significant donations from auto dealers to Governor DeSantis and other lawmakers. However, supporters of the bill argue that it is necessary to protect the interests of Florida’s auto industry.

The signing of the car dealership protection bill has sparked a debate between those advocating for traditional dealership models and those pushing for innovation and direct sales. As the automotive industry continues to evolve, the impact of this legislation on car buyers and the future of auto sales remains to be seen.