Ford EV Certification Requirements Raise Legal Issues Under the Wisconsin Motor Vehicle Dealer Law
Paul R. Norman , Sarah J. Reusché | 10.31.22
Ford dealers now have until December 2, 2022 to enroll in Ford’s new 2022 Model e Electric Vehicle Program (“EV Program”). Any dealer who does not enroll in the EV Program by December 2, 2022 will not be eligible to enroll until 2027. While there appears to be no penalty for enrolling in the EV Program now, and then deciding not to proceed at a later time, (Ford’s guidelines state that dealers may opt out at any time), there are certain risks associated with enrolling now. This article provides a brief overview of the EV Program and some of the legal concerns it presents.
Ford Dealers Face Three Options
By December 2, 2022, Ford dealers must choose whether they want to: (1) become a Model E Certified Elite dealership; (2) become a Model E Certified dealership; or (3) discontinue selling Model E vehicles effective January 1, 2024. Each of these options comes with unique requirements and implications.
1. Model E Certified Elite Dealership.
Estimated investment: $1.0-$1.2 million
- Install 2 DC fast chargers with minimum output of 120kW.
- Make at least 1 DC fast charger available for public use.
- Install one level 2 charging station.
- No cap on the number of Ford Model E electric vehicles the dealer is allowed to sell.
2. Model E Certified Dealership.
Estimated investment: $500,000
- Install 1 DC fast charger with minimum output of 120kW.
- Make the 1 DC fast charger available for public use.
- Install 1 level 2 charging station.
- Dealer will not be allowed to sell more than 25 Ford Model E electric vehicles per year.
3. Discontinue Selling Model E Vehicles.
A Ford dealer who chooses to not become either a Model E Certified Elite dealership or Model E Certified dealership will not be able to sell any fully electric Ford vehicles until at least 2027.
Legal Concerns with Ford Model e EV Program.
Ford dealers in several states are collectively challenging Ford’s EV Program due to the legal concerns it raises.
For starters, the cost is significant. Ford estimates that approximately 90% of the cost dealers will incur in becoming either a Certified Elite dealer or Certified dealer is attributable to EV chargers. The other 10% generally accounts for training programs. Dealers are left between a rock and a hard place when evaluating whether installation of public-facing EV chargers is worth at least a $1 million. The choice becomes to invest and receive unlimited supply of Ford EV models; partially invest and receive limited supply; or not invest, receive no EV models, and become uncompetitive in the fast-growing EV market. For rural dealers in small markets, an investment decision like this could force buy-out considerations and determine the future of their franchise.
Second, Wisconsin dealers (as well as dealers in certain other states) have a viable claim that the EV Program conditions are not reasonable requirements for selling and servicing electric vehicles, in violation of Wisconsin law. Specifically, Wisconsin Statutes Section 218.0116(1)(v) prohibits a motor vehicle manufacturer from imposing unreasonable requirements on dealers as a condition for selling and servicing certain models of the line make the dealer has been enfranchised to sell. Dealers seemingly have a strong argument that requiring installation of DC fast chargers and level 2 chargers is not reasonable because doing so is unrelated to the dealer’s ability to sell EV models. In addition, because the costs of becoming certified are the same for a dealer in a small market as a dealer in a large market, the investment per unit sold that a small dealer must make is grossly disproportionate compared to that of a large dealer.
While Ford dealers have a viable legal argument for challenging the certification requirements for being able to sell Ford EV models, there is a concern that a dealer who enrolls in the EV Program may be found to have conceded that the EV Program requirements are reasonable and thus waived its arguments to challenge them.
The 25-vehicle cap on dealers who become certified, but not at the “elite” level, also implicates the Wisconsin vehicle allocation statue (Wis. Stat. § 218.0125), which requires that a manufacturer’s system for the allocation, scheduling, or delivery of motor vehicles must be fair, reasonable, and equitable. Imposing a 25-vehicle cap on dealers who do not make the full $1 million investment is arguably not a fair system of allocation because vehicles are not being made available to all Ford dealers on equal terms.
Dealers considering whether to enroll in Ford’s new EV Program should consult with legal counsel about the implications it brings. While there is no penalty for signing up to become a Certified or Certified Elite dealer and later deciding to not proceed as such, a dealer still faces financial risk in incurring expenses prior to deciding to opt out, as well as waiving any claim that the program violates applicable Wisconsin statutes.
The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.