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Carmakers face a crossroads as they work to fit auto dealers into their EV plans

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Customers wearing protective masks looks at the interior of a vehicle for sale at a Ford Motor Co. dealership in Colma, California, Feb. 1, 2021.

David Paul Morris | Bloomberg | Getty Images

DETROIT — As automakers chase Tesla-like profits on new electric vehicles, they face an existential question: how best to bring franchised auto dealers along with them as they transition to EVs.

Some, such as General Motors, are asking luxury dealers to go all-in on EVs or get out of the business. Others like Ford Motor are offering dealers different “EV-certification” levels, while most other carmakers, or OEMs, know they need to change the sales process to fit the evolving industry, but are still trying to figure out how to do it.

“I think we’re all building this airplane as we fly,” Michael Alford, president of the National Auto Dealers Association, a trade association that represents more than 16,000 U.S. new franchised dealers, told CNBC. “Depending on the OEM, the level of engagement or the intensity of the engagement varies.”

Automakers and franchised dealers have a complex relationship that is backed, in many states, by laws that make it difficult, if not illegal, to bypass franchised dealers and sell new vehicles directly to consumers. (Tesla and other newer EV startups have worked around such regulations to cut costs.)

Both automakers and franchised dealers want to maximize profits, but they’re separate businesses that heavily rely on one another to succeed. Dealers rely on automakers for product to fill and move off lots, and the carmakers in turn rely on dealers to sell and service vehicles as well as serve as concierges for customers. 

How that historical relationship fits into an all-electric future is expected to be at the forefront of discussions between automakers and dealers at the National Auto Dealers Association Show occurring through Sunday in Dallas. The event attracts thousands of franchise dealers annually to hear from their respective automotive brands.

For dealers — from mom-and-pop shops to large publicly traded chains — EVs will mean new employee training, infrastructure and substantial investments in their stores to be able to service, sell and charge the vehicles. Depending on the size of the dealer, those upgrades could easily cost hundreds of thousands, or millions, of dollars. Of course, they want to make sure their investments will pay off.

“The tone and tenor of this subject matter has evolved, and I think it’s very, very clear this year that our legacy OEMs absolutely realize that we are essential going forward,” said Alford, who runs Chevrolet and Cadillac dealerships in North Carolina.

Competing with Tesla

As more automakers introduce EVs, they’re rethinking the sales process, including selling new vehicles largely, if not fully, online. Tesla was among the first automakers to embrace online sales for a large portion of its business, though it still has physical dealerships, information sites and service shops.

A greater shift online may limit the role of dealers to strictly processing, maintenance and as delivery centers going forward and eliminate the need for large lots of cars that they then sell to consumers.

“By and large, the franchise system remains in place even for EVs by traditional automakers, although they all seem to be looking at ways to tweak it to be more competitive, so they say, with the Teslas of the world,” said Michelle Krebs, Cox Automotive executive analyst.

Automakers believe doing so will provide consumers a more streamlined and cohesive sales process, but they also consider the dealers to be their partners and to offer “strategic advantages” when it comes to other sales and maintenance issues.

A Tesla dealership in Colma, California, on Wednesday, Jan. 26, 2022.

David Paul Morris | Bloomberg | Getty Images

Honda Motor has said it plans to move more sales online, including 100% online sales for its luxury Acura brand for EVs. Mamadou Diallo, American Honda vice president of sales, said the plan is to facilitate the ordering process online, but with the vehicle being picked up or delivered by dealers. Those procedures are still being worked out, though, he said.

“We want to proceed with ensuring that we provide convenience with what customers are looking for, with no intention of bypassing our dealer body,” Mamadou said Tuesday during a media call.

Jay Vijayan, who assisted in building out Tesla’s digital and IT systems, doesn’t believe selling EVs exclusively online will pan out. He said a mix of sales points is best, which is why Tesla and newer EV startups are selling online as well as opening new showrooms and service centers.

Apple still opens new stores, right? And every company you think is going to go direct is also opening new stores in the automotive space,” said Vijayan, founder and CEO of Tekion, a cloud-based dealer service provider.

Wall Street analysts have largely viewed direct-to-consumer sales as a means to optimize profit. However, there have been growing pains for Tesla when it comes to servicing its vehicles.

Ford CEO Jim Farley has said he wants the automaker’s dealers to cut selling and distribution costs by $2,000 per vehicle to be competitive with Tesla’s direct-to-consumer model.

Automaker approaches

Ford is among the automakers receiving the most pushback from dealers for its EV push, which includes EV-certification tiers that could cost more than $1 million per store, depending on the size of the dealership.

The Detroit automaker is facing legal challenges to the certification program from dealers who argue that the plan violates franchise laws. A group of 27 dealerships in Illinois filed a protest with the state’s motor vehicle review board, and four dealers in New York filed suit against the automaker last month, according to Automotive News.

Ford dealer Marc McEver said he signed on for the highest EV-certification tier at his dealership near Kansas City, Kansas, but he worries about the cost and timing of the program.

“I think we’re all concerned that what they’re having us put in now, by the time we really get some vehicles, will be outdated and need to be upgraded or replaced,” McEver, who also owns a Lincoln dealership, said.

Aside from the investments, dealers who opt into selling Ford EVs will need to abide by five standards to stay within good standing: clear and nonnegotiable pricing; charging investment; employee training; and improved vehicle purchasing and ownership experience for customer, both digitally and in person.

Ford on Saturday plans to outline some changes to its EV-certification tiers, according to two people familiar with the plans. The changes, as first reported by Automotive News, would narrow the differences between the program’s two tiers. The bottom tier comes with lower capital investment but also a smaller allocation of EVs from Ford.

Ford, though, unlike archrival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s gas-powered cars.

GM has offered buyouts to its Buick and Cadillac dealers that don’t want to shell out to sell EVs. About 320 of Cadillac’s 880 retailers took buyouts. Buick’s buyouts are ongoing, according to a spokesman.

Toyota Motor, for its part, has no plans to overhaul its franchised dealership network as it invests in electrified vehicles, CEO Akio Toyoda told dealers to resounding applause in September.

“I know you are anxious about the future. I know you are worried about how this business will change. While I can’t predict the future, I can promise you this: You, me, us, this business, this franchised model is not going anywhere. It’s staying just as it is,” said Toyoda, who will step down as CEO to become chairman in April.

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From Cartel to Evangelist: The Inspiring Journey of Juan Reyes, Puerto Rico’s Entrepreneur and Author

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Juan Reyes

In the realm of entrepreneurship, few stories are as captivating and inspiring as that of Juan Reyes, a self-made entrepreneur and author hailing from Juncos, Puerto Rico. Despite being born into a low-income family, Reyes defied the odds and carved his path to success through sheer determination, hard work, and an unwavering commitment to his goals. From establishing thriving businesses to becoming a renowned author, Reyes’s journey exemplifies the transformative power of entrepreneurship and the indomitable spirit of an individual driven by faith and dedication.

A Journey Born out of Necessity

Growing up in Juncos, Puerto Rico, Juan Reyes faced significant challenges stemming from his family’s financial limitations. To support himself and contribute to his family’s well-being, Reyes began working from a young age. However, he never allowed his circumstances to dampen his dreams or extinguish his ambition. Determined to change his destiny, Reyes embarked on a path that would not only uplift his own life but also inspire countless others.

A Multifaceted Entrepreneur

Reyes’s entrepreneurial acumen led him to establish several successful ventures that have made a profound impact. Among his notable accomplishments are King of Credit Repair LLC, KCL Clothing Inc, and Shalom Renovation LLC. These enterprises not only generated substantial revenue but also provided employment opportunities for others. Reyes’s astute understanding of business markets, coupled with his expertise in real estate, notary services, modeling, and preaching, contributed to his ability to transform businesses from scratch into multi-million dollar ventures.

Authorship and Beyond 

In addition to his entrepreneurial pursuits, Juan Reyes is also a respected author. His debut book, “From the Cartel to the Evangelist,” has garnered significant attention and acclaim. This captivating literary work chronicles Reyes’s personal journey, from overcoming adversity to finding redemption and purpose through his faith. The book serves as a testament to Reyes’s resilience and unwavering determination, inspiring readers to believe in their own potential and navigate their own paths to success.

From Cartel to Evangelist

Sponsored by Christian Faith Publishing

Reyes’s literary endeavors have received a significant boost through the sponsorship of Christian Faith Publishing. This collaboration has allowed Reyes to reach a wider audience with his powerful message of transformation, faith, and the pursuit of entrepreneurship. The partnership between Reyes and Christian Faith Publishing (visit the website here) has opened doors for him to inspire and motivate aspiring entrepreneurs and individuals seeking personal growth.

Empowering Others

Recognizing the significance of his own journey, Juan Reyes has made it his mission to give back to society and uplift others. Through speaking engagements and mentoring programs, Reyes shares his knowledge, unique ideas, and experiences with business leaders and young individuals alike. His teachings have become a beacon of hope for those who have faced similar challenges and made similar mistakes, demonstrating that even a fallen business can rise to great heights.

The Pride of Juncos, Puerto Rico

Juan Reyes remains deeply connected to his roots in Juncos, Puerto Rico. His success story has not only become a source of pride for the local community but also an inspiration for the youth in the neighborhood. Reyes’s achievements serve as a testament to the transformative power of entrepreneurship, instilling hope and motivating aspiring entrepreneurs to strive for greatness despite their circumstances.

Conclusion

Juan Reyes’s journey from a humble upbringing in Juncos, Puerto Rico, to becoming a renowned entrepreneur and author is a testament to the triumph of resilience, determination, and faith. Through his businesses, writing, and mentorship, Reyes exemplifies the boundless potential that lies within every individual. He reminds us that with unwavering dedication and a strong belief in oneself, anyone can rise above adversity and create a life of purpose and success. Juan Reyes is an inspiration, not only to entrepreneurs but to all those who dare to dream big and overcome the odds.

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Disney CEO Bob Iger rips Ron DeSantis over ‘anti-Florida’ retaliation

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Bob Iger, CEO, Disney, during CNBC interview, Feb. 9, 2023.

Randy Shropshire | CNBC

Bob Iger on Monday called Florida Gov. Ron DeSantis’ actions against The Walt Disney Co. retaliatory, “anti-business” and “anti-Florida.”

The feud between DeSantis and the company escalated earlier Monday, when the governor asked the state’s inspector general to determine whether the House of Mouse’s sly move to retain control over the outer limits of Orange and Osceola counties is legal – and whether any of the company’s executives were involved in the scheme.

During the company’s annual shareholder meeting Monday, Disney CEO Iger addressed investor inquiries about the ongoing dispute between the company and Florida legislators. He noted that Disney has more than 75,000 employees in the state, and has created thousands of indirect jobs, as well as brings around 50 million visitors to Florida every year and is the state’s largest taxpayer

“A year ago, the company took a position on pending Florida legislation,” Iger said, apparently referring to what critics called the “Don’t Say Gay” bill. “And while the company may have not handled the position that it took very well, a company has a right to freedom of speech just like individuals do.”

He added: “The governor got very angry about the position Disney took and seems like he’s decided to retaliate against us, including the naming of a new board to oversee the property and the business. In effect, to seek to punish a company for its exercise of a constitutional right. And that just seems really wrong to me.”

Disney's power play: DeSantis' board stripped of power until 2053

Iger said Disney plans to spend more than $17 billion in investments at Walt Disney World over the next decade, which would create around 13,000 jobs at the company and generate even more taxes for Florida.

“Our point on this is that any action that supports those efforts simply to retaliate for a position the company took sounds not just anti-business, but it sounds anti-Florida,” he said. “And I’ll just leave it at that.”

Last week, DeSantis’ newly appointed board of the Reedy Creek district, now named the Central Florida Tourism Oversight District, revealed that the previous Disney-allied board signed a long-lasting agreement that drastically limits the control that can be exercised over the company and its district.

Florida Governor Ron DeSantis speaks during ‘The Florida Blueprint’ event on Long Island, New York, United States on April 1, 2023. Ron DeSantis made comments on the Grand Jury’s indictment of Donald J. Trump, 45th President of the United States in Manhattan, New York. 

Kyle Mazza | Anadolu Agency | Getty Images

The agreement was signed on Feb. 8, the day before the Florida House voted to put DeSantis in charge. DeSantis replaced all of the Disney-allied board members with five Republicans on Feb. 27. It was only then that Disney’s new binding agreement was discovered.

The agreement includes a clause that dates back to 1692 in Britain. The “Declaration shall continue in effect until 21 years after the death of the last survivor of the descendants of King Charles III, King of England, living as of the date of this declaration,” the document said.

The governor’s letter calls the board’s agreement an attempt to “usurp the authority of the CFTOD board” and “nullify the recently passed legislation, undercut Florida’s legislative process, and defy the will of Floridians.”

He said at the agreement also has “legal infirmities” including inadequate notice, improper delegation of authority and ethical violations.

Disney, however, has said that all of the board’s maneuvers were completely legal — the agreement was discussed and approved in open, noticed public forums, in compliance with Florida’s Sunshine law.

The development in DeSantis’ conflict with Disney marks just the latest move in one of several partisan battles being waged by the Republican governor.

DeSantis is widely believed to be laying the groundwork to launch a 2024 presidential campaign. That move is expected to come not long after the current Florida legislative session ends in early May. Polls show that DeSantis is the most competitive of the potential opponents for former President Donald Trump in a GOP primary.

The Florida governor took aim at Disney after the company publicly balked at Florida’s HB 1557 law early last year. HB 1557, which critics called the “Don’t Say Gay” bill, limits early education teachings on sexual orientation or gender identity.

Republican state Rep. Randy Fine told CNBC’s “Squawk Box” last April that the bill dissolving Reedy Creek wasn’t retaliatory, but then said “when Disney kicked the hornet’s nest, we looked at special districts.”

Until recently, there had been no major public discussion about dissolving Disney’s long-established special district, which it’s occupied for 55 years, leading DeSantis’ critics to question its timing and the speed at which the governor acted against the company.

The fight between DeSantis and Disney shows no signs of slowing down. During a book tour stop in Georgia last week, DeSantis told attendees “You ain’t seen nothing yet.”

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WWE near deal to be sold to UFC parent Endeavor, sources say

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World Wrestling Entertainment Inc. Chairman Vince McMahon appears in the ring during the WWE Monday Night Raw show at the Thomas & Mack Center August 24, 2009 in Las Vegas, Nevada.

Ethan Miller | Getty Images

Vince McMahon’s World Wrestling Entertainment is in advanced talks to be sold to Ari Emanuel’s Endeavor Group, the parent company of UFC, according to people familiar with the matter.

A deal could be announced as soon as Monday. UFC and WWE are expected to form a new publicly traded company as part of the agreement, according to the people, who declined to be named due to the confidential nature of the discussions.

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Endeavor is slated to own 51% of the new combat sports and entertainment company, while WWE shareholders would get 49%, according to the people. The Endeavor deal gives WWE an enterprise value of $9.3 billion, they said.

Emanuel is expected to act as chief executive of both Endeavor and the new company. McMahon, likewise, is expected to be executive chairman, while Endeavor President Mark Shapiro will also work in the same role at the new company. Dana White will remain as president of UFC, while WWE CEO Nick Khan will serve as president of the wrestling business.

The development comes during the same weekend WWE hosts its flagship live event, WrestleMania, in California. The company has spent the past several months looking for a buyer. McMahon returned to the company as chairman in January to oversee the process. Shares of WWE are up more than 33% so far this year, giving it a market value of more than $6.79 billion.

The deal will effectively end WWE’s decades-old status as a family-run business. McMahon’s father founded WWE in its original incarnation during the middle of the 20th century, and McMahon is the controlling shareholder in the company. McMahon bought the company from his father in 1982. Since then, the company has grown into a global phenomenon, spawing stars suck as Hulk Hogan, Dwayne “The Rock” Johnson, Dave Bautista and John Cena.

McMahon, 77, retired from the company in July following a string of revelations that he paid several women millions of dollars over the years to keep them quiet about alleged affairs and misconduct. His daughter, Stephanie McMahon, became co-CEO alongside Khan. Paul Levesque, who’s both Stephanie McMahon’s husband and the wrestler known as Triple H, took over creative duties from Vince McMahon.

When Vince McMahon came back in January, Stephanie McMahon stepped down and Khan fully assumed the CEO role. The elder McMahon recently locked in a two-year employment contract, according to a securities filing.

Khan in recent weeks has been making the media rounds to discuss the potential sale. He told CNBC’s Morgan Brennan on Thursday that it’s been a robust sale process, drawing many interested buyers.

WWE CEO Nick Khan says he remains optimistic about plans to introduce betting

WWE brings with it a robust media and live events business, along with its decades worth of intellectual property. The company generated $1.29 billion in revenue last year, driven mainly by its $1 billion media unit.

UFC has paid off for Endeavor. Last year, the MMA league helped Endeavor’s sports business make $1.3 billion in revenue. Endeavor’s market cap stood at about $10.53 billion as of Friday’s close. The Endeavor-WWE deal values UFC at more than $12 billion.

WWE, at least at a glance, would also fit well with the cultures at Endeavor and UFC. McMahon has a brash public persona, making him an apparently good match for Emanuel and White, who are also known for their outsized personalities.

White, like McMahon, is no stranger to scandal, either. Earlier this year, video emerged showing the UFC boss slapping his wife during a public argument at a New Year’s Eve party in Mexico. White apologized.

Disclosure: Peacock, the streaming service owned by CNBC parent NBCUniversal, carries WWE events such as WrestleMania.

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