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Read. Follow. Verify.North Carolina Regulates Motor Vehicle Dealer Franchises, Warranty Reimbursements, and Over-the-Air Sales Commissions
Last action · May 5, 2025: Ref To Com On Rules and Operations of the Senate (Senate action)Sponsors: Brenden Jones and 14 others
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What This Bill Would Do
North Carolina lawmakers passed HB 406 to prohibit motor vehicle manufacturers from coercing dealers into facility upgrades, using rights of first refusal, or penalizing dealers based on past litigation. The measure requires manufacturers to provide reasonable compensation of at least 20 percent for product sales and sets strict warranty and recall reimbursement rules for dealers.
The measure alters the legal and financial relationship between automobile manufacturers and local franchised dealerships across the state by establishing mandatory reimbursement rates for loaner vehicles, warranty repairs, and remote software activations.
- North Carolina regulates motor vehicle franchise agreements and dealer rights under Chapter 20 of the General Statutes. context
- The General Assembly of North Carolina acts as the state's primary legislative body. context
Who It Would Affect
Groups the bill's text would affect if enacted, as described in the record. Being affected is not a position for or against it.
Licensed new motor vehicle dealers
Dealers receive new protections regarding franchise transfers, mandatory minimum compensation for over-the-air sales, and full reimbursement for warranty and loaner vehicle expenses.
Motor vehicle manufacturers and distributors
Manufacturers face new statutory restrictions on franchise terminations, transfer denials, facility image requirements, and pricing of tools and training.
Retail customers
Retail customers may experience changes in how vehicle accessories, over-the-air upgrades, and loaner vehicles are handled during servicing.
Key Facts
- Manufacturers are prohibited from conditioning franchise transfer approvals on a dealer's willingness to construct new facilities, renovate, or enter into a right of first refusal.
- Manufacturers may not inquire about or consider whether an applicant or their affiliate previously commenced a civil or administrative proceeding against a manufacturer.
- If a manufacturer rejects a dealer's proposed transfer or management change and the decision is not appealed or is overturned, the manufacturer must reimburse attorneys' fees for both dealer and applicant.
- Manufacturers must pay franchised dealers reasonable compensation of at least 20 percent of gross collections for over-the-air vehicle accessories or upgrades sold within 12 months of purchase or when the dealer is directly involved.
Show all 10 facts
- Manufacturers are banned from requiring a dealer to accept ownership of a new vehicle that cannot be immediately retailed due to an open recall, missing part, or stop sale order, or if not delivered within 90 days of shipping representation.
- Manufacturers cannot vary the price charged to a dealer for tools or training based on the dealer's compliance with a facility image program.
- Warranty and recall service compensation paid to dealers cannot be less than the dealer's current retail labor rate and retail parts amount.
- Dealers may establish an average retail labor time allowance by submitting 100 sequential customer-paid service repair orders or 90 days of repair orders.
- Manufacturers must reimburse dealers in full for the actual cost of providing a customer loaner or rental vehicle when required or approved by the manufacturer.
- The act applies to all current and future franchise agreements in effect as of the effective date.
Frequently Asked Questions
What protection do dealers have against manufacturers rejecting a franchise transfer?
What compensation do dealers receive for software updates or accessories sold remotely by manufacturers?
Can manufacturers force dealers to accept vehicles with open recalls?
What else do you want to know?
News Coverage
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Votes, people, money & the original sourceWhere This Stands
Currently passed chamber. The next step in the legislative lifecycle is Law.
Procedural history
16 actions- May 5, 2025SenateRef To Com On Rules and Operations of the Senate
- May 5, 2025SenatePassed 1st Reading
- May 5, 2025SenateRegular Message Received From House
- May 1, 2025HouseRegular Message Sent To Senate
- May 1, 2025HousePassed 3rd Reading
- May 1, 2025HousePassed 2nd Reading
Show 10 earlier actions
- Apr 30, 2025HousePlaced On Cal For 05/01/2025
- Apr 30, 2025HouseWithdrawn From Cal
- Apr 29, 2025HousePlaced On Cal For 04/30/2025
- Apr 29, 2025HouseCal Pursuant Rule 36(b)
- Apr 29, 2025HouseReptd Fav
- Apr 9, 2025HouseRe-ref Com On Rules, Calendar, and Operations of the House
- Apr 9, 2025HouseReptd Fav Com Substitute
- Mar 17, 2025HouseRef to the Com on Transportation, if favorable, Rules, Calendar, and Operations of the House
- Mar 17, 2025HousePassed 1st Reading
- Mar 13, 2025HouseIntroducedFiled
Version history
Only one version on file - nothing to compare yet. As later stages (committee substitute, engrossed, enrolled) are captured, the redline appears here.
View official text →Lobbying Activity
No state lobbying filings in our records match this bill. Federal lobbying reports (LDA) cover Congress, so they are not listed on state bills.
Full breakdown
Who this bill affects and the strongest case for and against it, written only from the bill’s own text.
Sponsors
Show 10 more sponsors
Discoveries
Patterns POLISCOPE noticed across the record. These are observations to investigate, not conclusions.
Expansion of Dealer Protections for Digital Sales
The legislation establishes explicit financial compensation rights for local dealers when manufacturers sell software upgrades or accessories remotely to local vehicle owners.
Connected Entities
Sources
www.ncleg.gov
Analysis Score
0–100- Significance75How much this matters to a regular citizen
- Controversy40Intensity of disagreement among stakeholders
- Entertainment5Compellingness for a non-policy-wonk reader
- Buzz25Current news / social attention level
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