Honda and Sony’s 50/50 partnership promised to create an EV that would put technology at t he forefront of the driving experience. While the Afeela moniker is still a bit odd, the sleek EV comes with a distinctive look and it also managed to garner its fair share of reservations.

However, things might come unglued thanks to a lawsuit from California auto dealerships who feel Sony and Honda illegally bypassed franchised dealerships to pursue their direct sales model.

Accusations are flying

According to the lawsuit filed by the California New Car Dealers Association (CNCDA) the two companies are violating state franchise laws with their joint project. The lawsuit not only targets Honda and Sony outright, but also Sony Honda Mobility Inc, and Sony Honda Mobility of America Inc.

A key accusation here is that the venture violates California’s franchisee laws by directly competing with franchised Honda and Acura dealerships. All 50 states have laws addressing this in some form with some (including this author’s home state of MIchigan) passing beefed-up laws that prohibit the direct sale of vehicles to consumers by automakers.Furthermore the lawsuit says that since Afeela itself is owned by Honda of America ad the two Sony Honda venture firms, Honda is now technically a parent company.

As a result, the CNCDA says that Afeela vehicles should be sold through Honda and Acura dealerships with the vehicle itself being built in facilities that already produce Honda and Acura products which they claim gives futher evidence to their side of the lawsuit.

“This is a direct attack on the 161 franchised Honda and Acura dealers in California that have been loyal partners in building the brand’s reputation and success for decades,” says CNCDA president Brian Maas.

Direct-to-consumer sales model could be threatened

The outcome of this lawsuit could have long-lasting ramifications for the direct-to consumer sales model with a win for the CNCDA potentially making companies think twice before using this method of distribution. Tesla has long been a pioneer of direct sales and it has shown that the strategy can work very well if executed correctly. Volkswagen is also looking into it and the outcome could have ramifications for its fledgling Scout brand.

Other brands like VinFast could also feel the potential bite from this lawsuit with the Vietnamese EV company using its own spin on the direct sales method to get its vehicles to consumers. This lawsuit is also making history in a way and is one of the first formal challenges to direct sales in the state of California with the Golden State being seen as a reliable sanctuary for direct sales due to its unique legislation.

“By cutting dealers out, they’re stripping vital consumer protections like local service support, transparent pricing, and warranty assistance, all while undermining the millions these dealers have invested in their facilities, employees, and communities. We will not allow a manufacturer to turn its back on the very network that made it profitable in the first place.”

This lawsuit (like others we have seen over the years) is also an attempt to defend and preserve the franchise dealer system that has come to be a part of the buying experience (for better or for worse.) Dealer Associations like the CNCDA, Detroit Auto Dealers Association (DADA) and others champion this system as a stable marketplace for consumers while also rewarding the investments dealerships have made for their employees and the surrounding community.

At the same time, the system is far from perfect and it has not only proven to be very inflexible and rigid when asked to comply with great swaths of change but more customers are getting upset with it. They say franchise dealers deliver poor buying experiences and many consumers have said they fell victim to deceptive sales practices, hidden fees, and even dishonest sales people when buying a new vehicle.