Porsche Is Sued by a U.S. Dealership Ahead of the Sportscar Maker’s IPO

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A South Florida dealership is suing Porsche, just ahead of an initial public offering of the car maker’s stock planned for late this month or early October.

On Thursday, The Collection, a dealership in Miami, filed suit against Porsche Cars North America and other Porsche subsidiaries, alleging that the auto maker violated Florida law and may be trying to squeeze out dealers so it can sell cars directly to consumers.

The dealer has been asking for more vehicles to sell and says Porsche has been withholding them. It cited communications, reviewed by Barron’s, saying Porsche wants the company to build a stand-alone facility selling only Porsche vehicles. In the correspondence, Porsche alleges that The Collection isn’t in compliance with the company’s requirements for sales facilities, and says that it would give the dealership more cars from a discretionary pool if it built a Porsche-only showroom.

The suit alleges that stance is a violation of a Florida law that says auto makers can’t withhold cars to force dealers to close a facility or build a new one.

“Whether this is part of a strategy to shift unpopular vehicles onto the books of dealers or a strategy to nix dealers standing in the way of a direct-to-consumer model, Porsche’s conduct is illegal,” reads the complaint.

Porsche didn’t immediately respond to requests for comment about the suit, the correspondence, or about relations with U.S. dealers. Porsche North America declined to comment.

“Porsche is trying to test the waters of direct to consumer sales of electric vehicles,” said Sean Burstyn, founder of Burstyn Law, the Miami firm representing the dealership.

The Collection’s suit alleges that by refusing to give it cars from the discretionary pool, Porsche is cutting into the amount of vehicles the dealership has to sell, chipping away at the value of the business in a process it says could continue until the franchise is worthless. That is because allocations to dealers are based on their share of nationwide sales; dealers who don’t get vehicles from the pool rank lower among their counterparts, making them eligible for fewer cars in the future, the suit says.

The dealership had complained to Porsche about its allocations and falling sales in a letter reviewed by Barron’s. In response, Porsche America wrote that sales were down nationwide in the first half of 2022, suggesting that broader decline could be part of the reason for sales weakness at The Collection. Porsche, the parent organization, reported first half U.S. retail sales of 32,529 units, down from 36,326 units delivered in the first half of 2021.

The Collection has sold roughly 1,400 Porsche vehicles annually in recent years, accounting for about 2% of Porsche U.S. retail volume. Porsche has almost 200 dealers in the U.S.

“This is an unfortunate and hopefully short chapter in what has been a nearly 30-year strong relationship between The Collection and Porsche,” Ken Gorin, the dealership’s CEO, said in a statement. “We did not make this decision lightly and remain hopeful that our historically exemplary relationship with Porsche will soon be restored.”

Dealership relationships are becoming more complicated as

Tesla

(TSLA) and other EV start-ups shake up the auto industry.

Tesla

doesn’t have traditional dealerships, selling cars directly to customers instead. That direct selling model, made possible by the internet, provides

Tesla

with a small profit advantage over its peers, enabling it to keep for itself the markup that historically would have gone to a dealership.

The suit comes as

Volkswagen

(VOW3. Germany), owner of the Porsche brand, prepares to sell stock in Dr. Ing. h.c. F. Porsche AG, the entity that makes the sports cars. A separate, publicly traded company,

Porsche Automobil Holding

(PAH3. Germany), owns more than 50% of

Volkswagen

stock.

Volkswagen plans to raise about $9.4 billion by selling stock in Porsche. VW didn’t immediately respond to a request for comment.

Volkswagen common stock closed down 1.7% in overseas trading. Shares were down before the suit was filed. European shares, to some extent, are reacting to the Federal Reserve’s Wednesday decision to raise benchmark interest rates by 0.75 percentage point. The

S&P 500
and

Dow Jones Industrial Average
both closed down about 1.7% Wednesday. The indexes fell by 0.8% and 0.4%, respectively, on Thursday.

Write to Al Root at [email protected]