NADA, Hyundai clash over new facility renovation policies

The National Automobile Dealers Association (NADA) is warning dealers of potentially illegal requirements within Hyundai’s recently updated sales and service agreement.

Why this matters: Various state franchise laws, implemented to protect car buyers and retailers, make uniform changes to any automaker’s dealership agreement difficult to implement at a national scale. While Hyundai is actively working to navigate the legal challenges presented by its new policies, this story underlines the importance of prioritizing flexibility over one-size-fits-all solutions when it comes to OEM-dealership relationships.

What happened

• Among other things, Hyundai’s new sales and service agreement revises its original facility renovation policy. Failure to meet the new requirements can result in termination of the agreement.

• Noting that the automaker’s new renovation standards could force dealers to make substantial investments, the NADA released a memo (obtained by Automotive News) warning that the new agreement may violate franchise regulations in some parts of the country.

• Several states have implemented laws requiring manufacturers to file updates to their dealership agreements with state authorities. Others require a 10-year waiting period between calls for facility upgrades, giving dealers time to make up for their renovation expenses. Hyundai’s addendums may be in violation of both policies.

• The Virginia Automobile Dealers Association has also criticized the new measures, sending a letter in April pointing out the company’s failure to follow state regulations.

The renovation program: Hyundai’s Accelerate initiative calls on dealers to renovate their facilities in preparation for the future of automotive retail. While the costs of such upgrades can be astronomical, the program also offers financial incentives, based on sales performance, for dealers who follow through with the improvements. These incentives are backed by a $1 billion investment.

Hyundai’s response: Hyundai is aware of the pushback toward its new policies, and will “work closely with our dealers, NADA and other stakeholders to address these concerns,” according to a spokesperson.

In this week’s Car Dealership Guy podcast, Randy Parker, CEO of Hyundai’s American operations, also emphasized that the program was collaborative in nature. “They’re not doing it alone,” he commented. “We're working very closely hand in glove with our National Dealer Council…and through that we maintain a high level of throughput, whether it's in service, aftersales, finance.”

Dealership response: Despite the controversy, a majority of dealers have already agreed to upgrade their facilities in keeping with Hyundai’s policies. Randy estimated that 55% of dealerships have been renovated, a number expected to hit 70% by the end of the year.

Bottom line: The complexity of state regulations make it difficult to implement widespread changes across dealership networks. This makes collaboration a critical component of retailer-manufacturer relationships. Thankfully, it seems that Hyundai is aware of the issues within its new addendums and is working toward a solution that works for both sides.

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 64,000 others now, it's free:

Connecting world-class talent with top-notch companies in Automotive.

Great career opportunities are hard to find. We make it easier. Search through open roles or submit your resume confidentially on the CDG Jobs Board. Best part? It’s 100% free.

Here are some standouts for anyone looking for their next move.

• Have a passion for sales? Montgomeryville Mitsubishi is looking for a sales consultant in Pennsylvania.

• Are you a talented mechanic? Tom Whiteside Chrysler Dodge Jeep Ram is looking for an automotive technician in Ohio.

• Have experience in B2B sales? Simple Recon is searching for B2B SaaS vendor.