HB 406 — Clarify Motor Vehicle Dealer Laws.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2025 H 21 HOUSE BILL 406 Committee Substitute Favorable 4/9/25 Short Title:

Representatives B.

Jones, Tyson, and Ross (Primary Sponsors).

For a complete list of sponsors, refer to the North Carolina General Assembly web site.

Transportation, if favorable, Rules, Calendar, and Operations of the House March 17, 2025 A BILL TO BE ENTITLED AN ACT TO CLARIFY VARIOUS MOTOR VEHICLE DEALER LAWS.

Condition its approval of a proposed transfer, sale, assignment, change in the dealer's executive management, principal operator, or appointment of a designated successor, on the existing or proposed dealer's willingness to construct a new facility, renovate the existing facility, acquire or refrain from acquiring one or more line-makes of vehicles, separate or *H406-v-2**H406-v-1* General Assembly Of North Carolina Session 2025 divest one or more line-makes of vehicle, or establish or maintain exclusive facilities, personnel, or display space.

20-305(6)c.1.II., III., or IV., as applicable, or (ii) the effective date of the Page 2 House Bill 406-Second406-First Edition General Assembly Of North Carolina Session 2025 franchise termination specified or proposed by the manufacturer in the notice of termination, whichever period of time is longer, and after a hearing on the matter, that there is good cause for the termination, cancellation, or nonrenewal of the franchise and that the manufacturer has acted in good faith as defined in this act regarding the termination, cancellation or nonrenewal.

House Bill 406-Second406-First Edition Page 3 General Assembly Of North Carolina Session 2025 a.

Each new and unsold motor vehicle vehicle, and each motorized or nonmotorized trailer, including, but not limited to, travel trailers, slide-in truck campers, and park models, within the new motor vehicle dealer's inventory that has been acquired within 24 months of the effective date of the termination from the manufacturer or distributor or another same line-make dealerin theordinarycourseofbusiness, andwhichhas not been substantially altered or damaged to the prejudiceofthemanufacturerordistributorwhilein the new motor vehicle dealer's possession, and which has been driven less than 1,000 miles or, for purposes of a Page 4 House Bill 406-Second406-First Edition General Assembly Of North Carolina Session 2025 recreational vehicle motor home as defined in G.S.

If the sale or activation of the permanent or temporary motor vehicle accessory, option, add-on, service, upgrade, feature, or improvement by either the manufacturer or the direct involvement of the dealer who sells or leases the vehicle to the retail customer occurs at the time of the new motor vehicle sale or lease, or within the 12-month period immediately following the sale or lease of the new motor vehicle by a North Carolina franchised motor vehicle dealer, the manufacturer or distributor provides the franchised motor vehicle dealer that sold the newmotorvehiclereasonablecompensationinanamountnotlessthan twenty percent (20%) of the gross compensation that was collected from the customer for the sale or activation of the accessory, option, add-on,service,upgrade,feature,orimprovementtotheoriginalNorth Carolina vehicle owner or lessee when the cost of which would equal or exceed (i) fifty dollars ($50.00), if the cost or purchase price to the House Bill 406-Second406-First Edition Page 5 General Assembly Of North Carolina Session 2025 retail customer involves a single, one-time payment, or (ii) seventy-five dollars($75.00)in cumulative cost or purchase priceover any 12-month period, if the retail customer is making multiple or periodic payments.

"(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to approve the sale or transfer of the ownership of a dealership by the sale of the business, stock transfer, or otherwise, or the transfer, sale or assignment of a Page 6 House Bill 406-Second406-First Edition General Assembly Of North Carolina Session 2025 dealer franchise, or a change in the executive management or principal operator of the dealership, change in use of an existing facility to provide for the sales or service of one or more additional line-makes of new motor vehicles, or relocation of the dealership to another site within the dealership's relevant market area, if the Commissioner has determined, if requested in writing by the dealer within 30 days after receipt of an objection to the proposed transfer, sale, assignment, relocation, or change, and after a hearing on the matter, that the failure to permit or honor the transfer, sale, assignment, relocation, or change is unreasonable under the circumstances.

For purposes of this subdivision, the sales performance or customer satisfaction performance of a dealership that has been owned by the candidate for less than two years prior to the date the existing dealer notified the manufacturer or distributor of the proposed change in the executive management or principal operator of the dealership may not House Bill 406-Second406-First Edition Page 7 General Assembly Of North Carolina Session 2025 be used in whole or in part as a basis for rejecting the candidate's application.

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(59) To vary the price charged to a dealer for any training, software, equipment, or tools that is in anywaybased upon a dealer's compliance with a facilityimage program or requirement." LOANERWARRANTY VEHICLE COST REIMBURSEMENT CLARIFICATIONS SECTION 8.

20-305.1 reads as rewritten:

"§ 20-305.1.

Automobile dealer warranty and recall obligations.

(a) Each motor vehicle manufacturer, factory branch, distributor or distributor branch, shall specify in writing to each of its motor vehicle dealers licensed in this State the dealer's House Bill 406-First Edition Page 9 General Assembly Of North Carolina Session 2025 obligations for preparation, delivery, pre-sale maintenance, manufacturer-directed component installationor assembly, warranty, manufacturer-sponsored maintenance programs, manufacturer extended warranty, parts exchange programs, and recall service on its products.

The disclosure required under this subsection shall include the schedule of compensation to be paid the dealers for parts, work, and service in connection with preparation, delivery, warranty, and recall service, and the time allowances for the performance of the work and service.

In no event shall the schedule of compensation fail to include reasonable compensation for diagnostic work, shipping, if required by the manufacturer or distributor, and for battery disposal or other disposal charges or airbag shipping, storage, or disposal, for shipping, storage, or disposal of any other parts, fluids, or vehicle components, and for all other associated fees that were actually incurred by the dealer, and associated administrative requirements as well as repair service and labor.

Time allowances for the performance of preparation, delivery, warranty, and recall work and service shall be reasonable and adequate for the work to be performed.

The compensation paid under this section shall be reasonable, provided, however, that under no circumstances shall the reasonable compensation under this section for warranty and recall service be in an amount less than the dealer's current retail labor rate and the amount charged to retail customers for the manufacturer's or distributor's original parts for nonwarranty work of like kind, provided the amount is competitive with the retail rates charged for parts and labor byother franchised dealers of the same line-make located within the dealer's market.

If there is no other same line-make dealer located in the dealer's market or if all other same line-make dealers in the dealer's market are owned or operated by the same entities or individuals as the dealership being compared, the retail rates charged for parts and labor by other franchised dealers located in the dealer's market that sell competing line-make motor vehicles as the dealer may be considered when determining whether the dealer's rates are competitive.kind.

… (a5) A motor vehicle dealer may accept a manufacturer's, factorybranch's, distributor's, or distributor branch's labor time guide as adequate and fair compensation for labor services rendered for repairs in an amount equal to the amount a retail customer pays for the same labor services with regard to labor time or mayelect to establish an average retail labor time allowance pursuant to subsection (a6) of this section.

(a6) A motor vehicle dealer may elect to establish an average retail labor time allowance in lieu of the manufacturer's, factory branch's, distributor's, or distributor branch's labor time guide for manufacturer, factory branch, distributor, or distributor branch-paid repairs or service bysubmittingtothemotorvehiclemanufacturer,factorybranch,distributor, ordistributorbranch 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, covering repairs made no more than 180 days before the submission, and dividing the total number of hours allowed by the franchisor for any such repairs under the franchisor's labor time guide into the total number of hours actually billed to the franchisee's retail customers and declaring the average percentage labor time allowance over the franchisor's labor time guide for franchisor-paid repairs or service.

The resulting quotient shall be applied to the applicable manufacturer, factorybranch, distributor, or distributor branch labor time guide to establish the motor vehicle dealer's average retail labor time allowance.

The average retail labor time allowance so declared shall go into effect 30 days following the declaration subject to audit by the motor vehicle manufacturer, factory branch, distributor, or distributor branch only of the sample submitted by the motor vehicle dealer and any adjustment of the average labor time allowance made by the motor vehicle manufacturer, factory branch, distributor, or distributor branch based only on an audit of that sample.

…." LOANER VEHICLE COST REIMBURSEMENT SECTION 9.

G.S.

Page 10 House Bill 406-First Edition General Assembly Of North Carolina Session 2025 "(33) To fail to reimburse a dealer located in this State in full for the actual cost, including applicable taxes and third-party fees, of providing a loaner or rental vehicle to any customer who is having a vehicle serviced at the dealership if House Bill 406-Second Edition Page 9 General Assembly Of North Carolina Session 2025 the provision of such a loaner or rental vehicle is required or approved by the manufacturer.

The manufacturer shall allow a dealer to submit a claim for rental vehicle reimbursement as required pursuant to this subdivision, in 30-day increments, prior to the end of the rental vehicle period if the repair for which the rental vehicle is associated is open due to a delay in parts or repair information from the manufacturer, factory branch, distributor, or distributor branch." SEVERABILITY CLAUSE SECTION 9.10.

EFFECTIVE DATE SECTION 10.11.

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