Hyundai dealer sues automaker for withholding vehicle allocation

Franchise auto dealers sometimes get a significant boost from having the right to sell a particular brand or model, but automakers charge hefty sums for the privilege. Annual franchise fees and mandatory spending on marketing and other business needs add up quickly, but the costs don’t stop there. Hyundai is being sued by one of its dealers for withholding inventory after the store’s owner refused to invest hundreds of thousands of dollars in a required store upgrade program.

Central Avenue Hyundai in Hartsdale, N.Y., sued its franchisor for withholding inventory after the dealer opted against performing renovations required in the automaker's Accelerate facility image program. Accelerate requires sizable investments to build larger facilities and modernize stores to draw EV buyers and customers into showrooms, as many people would prefer to buy cars online instead of hanging out with a group of strangers for a few hours to get a new ride. For some stores, the financial hit could extend into millions of dollars.

Automakers have control over allocations, or the number of vehicles sent to a dealership, and Central Avenue said Hyundai had cut the number of discretionary vehicles to punish it. Store management claimed that Hyundai reduced new vehicle shipments by almost 42 percent in the first quarter of 2022 compared to the same period in 2021. All dealers and automakers have struggled with new inventory, but Central Avenue’s drop was the largest among 13 nearby stores.