BEYOND THE LOT (AUG. 2022): AVOIDING THE SHOCK OF CONTRACT TERMS WITH EV CHARGING VENDORS
With electric vehicles (“EVs”) becoming more popular, many franchised dealers are entering into contracts with vendors to purchase advanced charging stations to be installed at specific dealerships. These purchases are often in conjunction with OEM and government programs that help to subsidize the cost of these stations. These vendors not only sell these chargers to dealers, but they also contract with dealers to maintain them as well.
Charging stations located at their dealerships will certainly help dealers provide customers with another reason to visit the dealership and can help keep customers regularly engaged with the dealership’s sales and service team. However, dealers must carefully review any agreement with a charging vendor before committing to a purchase or maintenance program. Here are a few of the important issues to consider before entering into any vendor agreement:
- Indemnification – The presence at your facility of an EV charger dispensing several hundred volts worth of electricity into customer vehicles brings concerns about damage to your facility, customers, and their vehicles if these chargers inadvertently create a fire, electrocution or other hazard during their operation. Dealers should look out in any vendor contract for provisions where the vendor is indemnifying the dealership from such liability.
- Data Access – Each charger’s use at your dealership will generate a rich set of data on customer transactions, including the length of charge, frequency of use, vehicle model and demographic information related to individual customers. Any vendor agreement should allow the dealership reasonable access to this information for its operations and to meet reasonable requests from OEM’s and state/local authorities, particularly those that are subsidizing the purchase and installation of the chargers.
- Service response times –To minimize downtime, a vendor contract should specifically guarantee a maximum response and resolution time for vendor repairs, along with remedies when expected service times are not met – i.e., any days with charger downtime beyond what is specified in the agreement could be remedied by partially offsetting vendor maintenance charges and other fees.
- Warranties – Does the vendor warranty against defects used in any repairs and the related labor to install or repair parts. Once again, given the significant investment a dealer will make in these chargers, it would only be reasonable to ask for such warranties.
- Compliance – Many states have programs sponsored by utilities or government agencies promoting the adoption of fast-charging chargers and their related infrastructure. In some instances, dealers may be able to leverage these programs to subsidize the purchase of their chargers. Any vendor agreement should be carefully reviewed to ensure that it will not conflict with any requirements of these programs and that if more formalized requirements are adopted into state, federal or local law, that the vendor will be obligated to help dealers comply with such requirements.
- Post-contract issues – If your vendor agreement expires or terminates for any reason, what happens to the chargers? Is your dealership allowed to continue to use them or is their use permitted only with the existence of a valid maintenance contract with the vendor? If the latter, it may be reasonable to require the vendor to buy back any purchased chargers at a reasonable price (i.e., the purchase price minus a discount reflecting the remaining life of the equipment).
Many thanks to dealer client, JP Garvey for his input into this article.
Mr. Timson is an experienced attorney focused on franchised automobile dealerships. He is a member of Greater New York Auto Dealers Association and the National Association of Dealer Counsel. He can be reached at firstname.lastname@example.org or 631-777-2401.
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