ANJING, China — When setting up a would-be Tesla rival in China, a couple of factors are key.
A � edgling electric vehicle mak-er needs, of course, oodles of cash. It also must have unblinking government backing. And, crucially, it must be steeped in entre-preneurial ambition.
None of that is in short supply in the world’s biggest auto market. EV startups with unfamiliar names are mushrooming here with abandon, seeking to sell cars not just in their own backyard but to make the big
time in the U.S. as well. Many are likely destined to fall short of their goals, but even a small number of success stories could trigger big shifts in the global auto industry.
Be it boom or bub-ble, China’s EV out-break is perfectly embodied by one wannabe, Byton.
� e aspiring brand was founded only
last September. It hasn’t sold a single vehi-cle, and it is still building its � rst factory, on a muddy � eld here just northwest of Shang-hai. But Byton plans to start selling a high-tech EV crossover in China late next year and, in 2020, ship it stateside.
� at vehicle, to be called the M-Byte, is en-visaged as a smartphone on wheels.
Concepts are replete with a mammoth dash monitor — more than 4 feet wide and
BOOM orBUBBLE?Chinese EV startups are full of global ambition, but most have yet to sell a single vehicle
“ ““Every startup story begins with a dream. This is an era of heroes. Big or small, we all have a dream to become a hero.”Feng Changge, Byton founderand co-chairman
see CHINA , Page 16
Byton K-Byte Concept future productpipelineF I F T H I N A 1 0 - PA R T S E R I E S
How the increasingly versatile Hyundai-Kia group plansto deploy its diverse powertrains, European-inspired designsand crossover platforms across its brands I PAGES 20-22 I
ÜRBURG, Germany — Encouraged by the promising start of its performance line among demanding European consumers, Hyundai hopes its upcoming Veloster N sports car can
improve its perception among U.S. buyers.� e Korean automaker, no longer satis� ed with be-
ing just a rational choice for penny pinchers, believes injecting its value-oriented image with a dose of high-octane emotion can win over customers who never considered a Hyundai.
“We’re � shing in a di� erent pond,” said � omas
Schemera, the former BMW executive who heads Hyun-dai’s high-performance ve-hicle division, while testing continued for the preproduction Veloster N here on Germany’s premier proving ground.
� e rise of the N brand represents a signif-icant step in Hyundai’s evolution as a global competitor and comes at a critical time for the company.
For years, Hyundai’s formula was value,
A RUNNING STARTHyundai’s � rst N model wows Europeans, boding well for U.S. entry
Where Hyundai’s N brand goes from here I PAGE 34 I
With vehicle subscription plans such as Book by Cadillac and Care by Volvo gaining momentum and clien-tele, some states are scrutinizing the models and their implications for dealership franchise laws and state revenue streams.
It has led to a temporary ban on
subscription programs in Indiana and an on-hold proposal in Califor-nia that would have required that any automaker subscription plan go through its dealers. � ey are among the � rst states to look at how to treat vehicles in the growing number of subscription programs o� ered by manufacturers and dealers — or even whether regulation of the programs is
necessary. New Jersey dealers also are seeking regulatory changes.
Dealers want to make sure they’re not left out of a new business stream and that their margins are protected for the long run, while automakers want to be able to o� er mobility ser-vices and advanced technology to consumers absent new and compli-cated statutes and regulation. � e
Subscriptions’ next hurdle: State lawsLegislators take deeper look; dealers, automakers wary
10 inches high — navigated by gesture con-trol. � e battery, o� ered in two sizes, will deliver a driving range up to 329 miles . And, to boot, it will sticker for a modest $45,000.
If that all sounds too good to be true, execu-tives hope to have their Nanjing factory ramped to peak production of 300,000 vehi-cles within � ve years. Oh, and that output will span at least two nameplates — including an upcoming K-Byte sedan with Level 4 auton-omous driving ability.
What makes CEO Carsten Breitfeld, a for-mer BMW Group vice president, think he has any chance in pulling it o� ? In a word, China.
“What we do here, to be honest, is nearly impos-sible,” Breitfeld said at the June opening of By-ton’s headquarters here. “� e only place in the world you can make it is China.”
Indeed, China has emerged as a global incu-bator for next-generation electri� ed driving and a
potent Silicon Valley rival. � e roster of up-starts is long and growing. Beyond Byton, there is Nio, Singulato Motors, Xiaopeng Mo-tors (commonly known as Xpeng) and Welt-meister (also known as WM Motor). Each is virtually unknown overseas; each aspires to be the next Tesla.
Byton’s founder and co-chairman, Feng Changge, is a Chinese auto dealer who was inspired to start making cars for himself after a one-hour sit-down with Tesla CEO Elon Musk.
Feng is a poster child for the zeitgeist sweeping the nation. “Every startup story be-gins with a dream,” he said. “� is is an era of heroes. Big or small, we all have a dream to become a hero.”
But survival, let alone hero status, is still a long shot for most of these startups. � e � eld is crowded, and the technology is still in its infancy. Moreover, the growing pains for Tes-la, which is still struggling with mass produc-tion and has yet to book an annual pro� t, are sober warnings of the hurdles ahead.
China’s rulesChina already is the world’s biggest EV mar-
ket. Sales soared 96 percent to 313,000 vehi-cles in the � rst half of this year, according to the China Association of Automobile Manu-facturers. But some 110 EV makers are chas-ing that pie, and most, like Byton, have yet to sell a single vehicle. Many industry watchers warn the bubble is bound to burst.
“Most of them won’t happen,” James O’Neill, managing director of advisory bank
CHINA
continued from Page 1
110 EV makers chase market’s soaring sales
““Most of them won’t happen. These guys are jumping in on the � y, saying EVsare the next big thing. But a lot of them are going to get to a point where they say,
‘This is a lot more dif� cult than I thought.’ ”James O’Neill, managing director, JFP Holdings in Beijing
Breitfeld: “Nearly impossible” task
JFP Holdings, in Beijing, told Automotive News. “� ese guys are jumping in on the � y, saying EVs are the next big thing. But a lot of them are going to get to a point where they say, ‘� is is a lot more di� cult than I thought.’ ”
China plays by its own rules. Beijing is � xat-ed on EVs as a crucial next-generation tech-nology China must dominate.
Its authoritarian government has an action plan called Made in China 2025 that spells out that ambition and calls for China to lead in autonomous driving and arti� cial intelli-gence.
By 2022, Beijing wants annual production of new-energy vehicles to reach 2 million units. � e category includes plug-in hybrids and green alternatives such as fuel cell vehi-cles, but in practice, it means mostly bat-tery-powered full electrics.
Such top-down policies make EVs must-haves for old-guard manufacturers, but they also entice new players such as Byton into the game. A California-style carbon trade pro-gram, for example, begins next year and adopts more stringent requirements in 2020. EVs get the most generous credits — the lon-ger their range, the more points they generate for their manufacturer.
China further stokes EV sales with subsidies of up to 67,500 yuan ( $9,800 ) per vehicle and other gimmicks, such as special allowances for limited license-plate registrations in big cities.
Local governments compete for factories and jobs by doling out sweetheart loans.
“Investors think, ‘� e government wants this to happen, and that’s a green light for us to go in with these huge investments,’ ” said Michael Dunne, CEO of ZoZo Go, an invest-
ment advisory � rm focused on China’s autonomous and EV markets. “With that gov-ernment backing, you have a willingness to stay in the game as long as it takes to succeed and thrive.”
� e speed, zeal and ease with which China is attacking the future has traditional metal benders from Tokyo to Detroit to Wolfsburg looking over their shoulders.
“The shift toward new-energy vehicles, as a result of the strengthening NEV poli-cies, has given China the momentum to overtake other countries,” Kazuhiro Ko-bayashi, Toyota’s head of China opera-tions, warned at this year’s Beijing auto show. “What impresses me the most is the sense of speed.”
To understand how China does it, take a
closer look at Byton. Feng found his EV inspiration only in 2014.
As chairman of Harmony Group, one of Chi-na’s largest luxury-brand auto retailers, he had just begun collaborating with Tesla in af-tersales.
“Tesla,” he said, “made me realize the auto sector would experience a revolution.”
Feng wanted to play a part and soon began assembling what are known in China as the “four haves”: capital, technology, product and factory. � ey are considered the keys to success.
A scant four years later, he is nearly there.
CapitalIn the beginning, Feng took the natural ap-
proach for China. He partnered with two of its biggest tech moguls: Tencent Chairman Ma Huateng and Terry Gou, chairman of Fox-conn, the electronics giant best known for as-sembling the Apple iPhone.
� ey began recruiting talent and aimed high.
In their sights was the BMW team that engi-neered the i series of electri� ed vehicles, in-cluding the i3 and i8. � ey poached Breitfeld, a German mechanical engineer who was head of i8 development. Other BMW col-leagues soon followed.
But they joined with a caveat. � e foreign managers wanted unencumbered control, without the interference of big external inves-tors tied to Tencent and Foxconn. So Byton turned to traditional capital markets and more hands-o� investors.
As of June, the haul from those funding sources, including a large state-owned auto-
maker and the world’s largest producer of lithium ion batteries for vehicles, totaled around $800 million, Breitfeld said. � at’s not a lot by global standards; it’s less than Toyo-ta’s annual r&d budget.
But the secret sauce in China is sometimes unseen. Government assistance rang up to the tune of $800 million, Breitfeld said, in-cluding subsidies and guaranteed loans from Nanjing to build the plant. Byton doesn’t have to repay the loan until it turns pro� table, and its own investment amounts to less than 20 percent of the plant’s cost, Breitfeld esti-mated.
“It’s basically taking the risk completely away from us,” Breitfeld said.
TechnologyBreitfeld and his international team of en-
gineers, designers and production special-ists seek to channel their wealth of expertise into cutting-edge technology, not just anoth-er car.
Some 300 of the company’s 700 employees are in Santa Clara, Calif., working on the ad-vanced electronics Byton hopes will set its cars apart. Another 80 are in Munich, focused on design.
� e world headquarters in Nanjing exudes a Silicon Valley vibe, with exposed concrete ceilings, trendy open seating and soothing walls of leafy plants. Breitfeld wants to ex-pand the global head count to 1,200 by year end.
Byton’s cars make a hard sell on technolo-gy, from the expansive display panels — as wide as the entire car — to the tablet embed-ded in the steering wheel.
� at’s a top strategy for all of China’s EV startups. � ey position themselves as a new breed born from the convergence of old-school automakers and futuristic tech compa-nies.
“You can’t call them startups anymore be-cause they are too big. I call them emerging
auto-tech companies,” said Zhou Lei, a part-ner and auto analyst at Monitor Deloitte. “In-vestors in China have changed their focus from traditional, labor-intensive industries to those with new-technology elements that capture the eyes of China’s growing high-end consumers.”
Byton’s very name seeks to telegraph tech-nology. It is short for “bytes on wheels,” a nod to its ambition of developing an automobile that is a next-generation smart device .
Global design chief Benoit Jacob, another BMW defector who worked on the i program, says Byton’s styling must exude this high-tech aura at � rst glance. � e K-Byte sedan concept, for instance, has a slender module that houses lidar sensors along the spine of the roof. Other lidar sensors pop out under the sideview mirrors and retract when the car isn’t in autonomous mode.
“We have to show digital power,” Jacob said
Byton’s FengChangge wentfrom dealer toEV maker.
Byton’s factory in Nanjing, China, is under construction, above, but the startup plans to start selling its M-Byte in China late next year. The interior, left, boasts a 4-foot-wide monitor.
To keep costs down, Byton wants to get bywith fewer prototypes, such as these M-Byte crossovers, by doing detailed teardownsof the ones it does build.
Jacob: “Show digital power”
“Most of them won’t happen. These guys are jumping in on the � y, saying EVsare the next big thing. But a lot of them are going to get to a point where they say,
‘This is a lot more dif� cult than I thought.’ ”James O’Neill, managing director, JFP Holdings in Beijing
closer look at Byton. Feng found his EV inspiration only in 2014.
As chairman of Harmony Group, one of Chi-na’s largest luxury-brand auto retailers, he had just begun collaborating with Tesla in af-tersales.
“Tesla,” he said, “made me realize the auto sector would experience a revolution.”
Feng wanted to play a part and soon began assembling what are known in China as the “four haves”: capital, technology, product and factory. � ey are considered the keys to success.
A scant four years later, he is nearly there.
CapitalIn the beginning, Feng took the natural ap-
proach for China. He partnered with two of its biggest tech moguls: Tencent Chairman Ma Huateng and Terry Gou, chairman of Fox-conn, the electronics giant best known for as-sembling the Apple iPhone.
� ey began recruiting talent and aimed high.
In their sights was the BMW team that engi-neered the i series of electri� ed vehicles, in-cluding the i3 and i8. � ey poached Breitfeld, a German mechanical engineer who was head of i8 development. Other BMW col-leagues soon followed.
But they joined with a caveat. � e foreign managers wanted unencumbered control, without the interference of big external inves-tors tied to Tencent and Foxconn. So Byton turned to traditional capital markets and more hands-o� investors.
As of June, the haul from those funding sources, including a large state-owned auto-
maker and the world’s largest producer of lithium ion batteries for vehicles, totaled around $800 million, Breitfeld said. � at’s not a lot by global standards; it’s less than Toyo-ta’s annual r&d budget.
But the secret sauce in China is sometimes unseen. Government assistance rang up to the tune of $800 million, Breitfeld said, in-cluding subsidies and guaranteed loans from Nanjing to build the plant. Byton doesn’t have to repay the loan until it turns pro� table, and its own investment amounts to less than 20 percent of the plant’s cost, Breitfeld esti-mated.
“It’s basically taking the risk completely away from us,” Breitfeld said.
TechnologyBreitfeld and his international team of en-
gineers, designers and production special-ists seek to channel their wealth of expertise into cutting-edge technology, not just anoth-er car.
Some 300 of the company’s 700 employees are in Santa Clara, Calif., working on the ad-vanced electronics Byton hopes will set its cars apart. Another 80 are in Munich, focused on design.
� e world headquarters in Nanjing exudes a Silicon Valley vibe, with exposed concrete ceilings, trendy open seating and soothing walls of leafy plants. Breitfeld wants to ex-pand the global head count to 1,200 by year end.
Byton’s cars make a hard sell on technolo-gy, from the expansive display panels — as wide as the entire car — to the tablet embed-ded in the steering wheel.
� at’s a top strategy for all of China’s EV startups. � ey position themselves as a new breed born from the convergence of old-school automakers and futuristic tech compa-nies.
“You can’t call them startups anymore be-cause they are too big. I call them emerging
auto-tech companies,” said Zhou Lei, a part-ner and auto analyst at Monitor Deloitte. “In-vestors in China have changed their focus from traditional, labor-intensive industries to those with new-technology elements that capture the eyes of China’s growing high-end consumers.”
Byton’s very name seeks to telegraph tech-nology. It is short for “bytes on wheels,” a nod to its ambition of developing an automobile that is a next-generation smart device .
Global design chief Benoit Jacob, another BMW defector who worked on the i program, says Byton’s styling must exude this high-tech aura at � rst glance. � e K-Byte sedan concept, for instance, has a slender module that houses lidar sensors along the spine of the roof. Other lidar sensors pop out under the sideview mirrors and retract when the car isn’t in autonomous mode.
“We have to show digital power,” Jacob said
of Byton’s design language, which he calls New Semantics. “We don’t want to hide our technology. We want to celebrate it.”
ProductByton’s planned crossover and sedan will use
the same platform and electric powertrain, and the batteries will come in two variants.
� e base model M-Byte crossover gets a 71-kilowatt-hour battery with a 249-mile range; a more powerful 95-kWh battery op-tion will achieve 329 miles . � e K-Byte sedan will use the same batteries but have a longer range because of better aerodynamics and a lighter weight, Breitfeld said.
Byton plans to start rolling out autonomous K-Byte prototypes as early as this year, with an eye toward making Level 4 vehicles ready for commercialization around the end of 2020 or early 2021. Customers will be able to use that hands-o� driving feature only in lim-ited areas that support it, Breitfeld said.
Byton sees a crossover as key to a strong launch because consumers are � ocking to the segment, not only in the U.S., but in China.
Crossovers are the leado� products for a host
of EV newcomers, including Singulato, WM Motor, Xpeng and Nio. Many are due this year. Pricing is expected to run the gamut, but most, like Byton, are seeking to undercut Tesla’s Model X with sticker prices less than $50,000.
“If you want to be successful,” Breitfeld said, “you need to have an a� ordable product.”
Byton seeks to contain cost partly by adopt-ing a direct-to-consumer retail model similar to Tesla’s. Breitfeld says Byton can trim costs by up to 20 percent that way.
In the U.S., dealers would be used as agents who connect customers to Byton but don’t actually hold inventory, said Henrik Wenders, another BMW i veteran who now leads global marketing at Byton. Buyers’ con-tracts would be with Byton, not the dealer.
In China, Byton plans to open up to 30 brand stores by year end.
FactoryBefore selling any cars, Byton must make
them. And here’s where things get tricky.As of June, a prototype trial workshop was
the only building at the site of Byton’s future assembly plant in a sprawling industrial park
on the outskirts of Nanjing. About two dozen vehicle bodies occupied the sparkling prem-ises, but workers had built just three complete prototypes. � ose were heading to crash tests.
Before starting production next year, Byton plans to build just 200 crossovers for valida-tion and other prototype testing, a mere handful compared with the way old-school players operate.
“We don’t want to build thousands of cars, because it’s way too expensive,” said Mark Duchesne, Byton’s global production chief. He spent � ve years leading various manufactur-ing divisions at Tesla and, before that, nearly two decades setting up factories at Toyota.
“It’s one way we can keep costs down,” Duch-esne said, adding that Byton wants to get by with fewer prototypes by doing detailed tear-downs of the ones it does build. “� at allows us to really condense our time schedules.”
Byton plans to shave time by doing trial production in the prototype workshop, then hit the ground running when the assembly plant opens.
Byton’s factory in Nanjing, China, is under construction, above, but the startup plans to start selling its M-Byte in China late next year. The interior, left, boasts a 4-foot-wide monitor.
Making it or faking it?China has a fast-growing � eld of EV hopefuls. Here’s a look at some of them.
NioVehicle: ES8 crossoverOn sale: Delivering initial run of 10,000 Founders Edition units in ChinaTech: 70-kWh battery, cells by CATLRange: 221 miles Price: $65,000-$79,500 Production: Outsourced to JAC
WM MotorVehicle: EX5 crossoverOn sale: September in ChinaTech: 46-kWh, 53-kWh and 57-kWh batteries, cells by Godsend Power and CATLRange: 186-286 miles Price: $26,100-$32,600 Production: Factory in Wenzhou with 100,000 capacity
SingulatoVehicle: iS6 crossoverOn sale: Fall in China, then other countriesTech: 80-kWh battery, cells by PanasonicRange: 249 miles Price: $29,000-$43,500 Production: Outsourced to BAIC at � rst, but 2 factories in Anhui and Jiangsu provinces to open by 2020
XpengVehicle: G3 crossover On sale: End of 2018 in ChinaTech: 44-kWh battery, cells by SunwodaRange: 199 miles Price: $29,000-$40,600 Production: Outsourced to Haima initially, later switching to own plant in Zhaoqing with 100,000 capacity
Leap Vehicle: S01 four-seat sporty coupeOn sale: First half of 2019 in ChinaTech: 140-kWh battery, cells by Panasonic and BAK GroupRange: 224 miles Price: $21,800-$29,000 Production: Building factory in Jinhua that targets 200,000 capacity
BytonVehicle: M-Byte crossoverOn sale: Late 2019 in China,2020 in the U.S.Tech: 71-kWh and 95-kWh batteries, cells by CATLRange: 249-329 miles Price: About $45,000 Production: Building factory in Nanjing with 300,000 capacity Source: Companies
AUGUST 20, 2018 • 17
Jacob: “Show digital power”
Singulato iS6 crossover
Nio ES8 crossover
Leap S01 sporty coupe
see CHINA, Page 18
18 • AUGUST 20, 2018
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“If we had all the time in the world, we’d clean the building, have an opening party, and then move in the equipment,” Duchesne said. “We don’t have the luxury of that time.”
�e vision may sound risky to anyone fa-miliar with Tesla’s troubled ramp-up of its mass-market Model 3 sedan. Tesla repeated-ly has fallen short of its production goals and jury-rigged an auxiliary assembly line out-side, under a large tent, to boost output.
Duchesne said Byton can avoid such pit-falls. Its plan is to take advantage of China’s plentiful, a�ordable labor and resist the temptation to use robots in every corner of the factory.
“We won’t be doing what Tesla is doing,” said Duchesne, who has set up seven facto-ries in �ve countries during his career. “�ey had a vision of machines building the ma-chine. We’ll be very conventional. We’ll use people where it makes sense.”
If everything goes smoothly, Byton wants to make 5,000 vehicles next year, 65,000 in 2020 and 300,000 a mere three years after that.
“Our schedule is aggressive, but I’ve worked on more aggressive schedules,” Duchesne said. “Preparation is everything. Our strategy is to prepare and over-prepare.”
Reality checkIn China, there is a derogatory term for slick
startups that materialize overnight and daz-zle with lofty visions and charismatic leaders. �ey are called “PPT companies,” a play on the PowerPoint plans their leaders are fond of presenting but usually fail to deliver.
Breitfeld insists Byton is di�erent. But there are no shortcuts to tedious prod-
uct validation and regulatory approval. Fara-day Future is one cautionary tale.
Its parent company, LeEco, was a vid-eo-streaming website in Beijing that eventu-ally expanded into �lmmaking, TV manufac-turing, mobile phones, broadcast sports pro-grams and even ride-hailing. But founder Jia Yueting bet all that on breaking into EVs.
�e struggling EV contender still wants to start delivery of its FF 91 luxury electric cross-over in December. But it has been a bumpy, circuitous road.
Faraday Future initially planned to build the vehicle, purported to have a three-second 0-to-60-mph time and 300-mile range, at a $1 billion assembly plant near Las Vegas.
It was forced to scrap that plan amid a crip-pling cash crunch. Facing angry creditors back home, Jia reportedly de�ed orders by Chinese regulators this year to return and sort out the mounting debts.
Instead, he camped out stateside, in a kind of self-imposed exile, to feverishly raise more money. He eventually did. But the chastened Faraday Future downsized its ambitions and opted to build the FF 91 at a refurbished for-mer Pirelli tire factory in central California.
On July 30, Faraday Future said it had com-pleted its �rst body-in-white for the FF 91.
Even that modest achievement is miles ahead of most aspiring competitors from China. Analysts caution that it is too early to say which startups are making it and which are faking it.
“Some of these entrepreneurs really want to do something. Some of them just want to tell
stories,” said Yale Zhang, managing director of Automotive Foresight, a consultancy in Shanghai. “Even if the company fails, the founder can still come away with a lot of money.”
Zhang is among those expecting an indus-try shakeout.
�e ranks of EV players could thin as early as 2020, he said, when Beijing starts pulling the plug on its generous EV subsidies. At the same time, the threat of U.S. tari�s looms over hopefuls such as Byton that are counting on exports to buttress the business.
But those that survive still will be able to tap a vast pool of young, wealthy customers sali-vating for something fresh. EV optimists say capturing just a sliver of the biggest and fast-est-growing auto market on earth guarantees handsome returns.
Leon Li, 39, is among the cult of true believ-ers wholly sold on China’s EV vision.
�e management consultant from Beijing is among the 1,000 EV acolytes who plunked down a $260 deposit to preorder the Byton M-Byte due next year. Li wants to trade his 10-year-old Mazda6 sedan for a high-tech wonder with all the �air of a Tesla but a more attainable price.
He likes Byton for its sweeping dashboard video display, which he called “absolutely dazzling.”
“I’m looking for something with a soul,” Li said at the glitzy unveiling of the K-Byte sedan concept in Shanghai, “and Byton de�nitely has soul. I think Byton is rede�ning the car.” a
Yang Jian contributed to this report.
CHINAcontinued from Page 17
Faraday Future’s cash crunch offers a cautionary tale. It still
wants to start delivery of the FF 91 in December.
“ ““Some of these entrepreneurs really want to do something. Some of them just want to tell stories.”Yale Zhang, managing director, Automotive Foresight
Software provider sues Case auto groupA major provider of dealership man-
agement software programs and ser-vices is suing Rick Case Automotive Group, of Sunrise, Fla., for allegedly breaching its licensing agreement and misappropriating trade secrets.
Integrated Vehicle Solutions Group, which provides software and support services to dealerships, also accuses the dealership group, a number of its dealerships in Florida, Ohio and Georgia, and co-owner Rita Case of unjust enrichment and wrongfully re-fusing to return about 150 proprietary software programs after failing to pay monthly licensing fees for the past
year and a half.“�ese important and very pro�t-
able programs, clearly licensed un-der a written license agreement, have been appropriated,” said the software provider’s lawyer, Ian Ku-ko�, of Miami. “�e Rick Case deal-erships have refused to pay licensing fees and locked my clients out of their own programs.”
“We believe those damages are in the millions of dollars,” Kuko� said.
However, defense lawyer Aaron Horowitz, of Fort Lauderdale, Fla., said, “My clients deny the allegations of IVSG’s complaint, and we will be defending the case vigorously.” �e Rick Case defendants have not yet �led their answer to the complaint.
Unpaid balanceRick Case Automotive Group has
17 dealerships and ranks No. 39 on Automotive News’ list of the top 150 dealership groups based in the U.S., with retail sales of 21,913 new vehi-cles in 2017.
Integrated Vehicle Solutions Group partners with CDK Global, one of the two primary providers of dealership management systems in the U.S. Reynolds and Reynolds Co. is its ma-
jor competitor. According to the suit, �led June 11
in Broward County, Fla., Circuit Court, the Rick Case dealerships were licensed to use Integrated Vehi-cle Solutions Group programs for sales, service, accounting, parts and payroll management. From late 2010 until 2016, the dealership group and its stores accessed more than 1,395 individual modules “without inci-dent, complaint or challenge” to In-tegrated Vehicle Solutions Group’s ownership of the programs, the suit said.
In 2016, Integrated Vehicle Solu-tions Group upgraded the platform at the dealership group’s request at a charge of $37,400, with a $16,000 dis-count conditioned on a new two-year minimum license agreement.
�e dealership group paid the dis-
counted amount, $21,400, but has refused to sign the new agreement or pay the $16,000 balance, the suit contends. �e dealership group stopped making monthly license payments in February 2017 and has not complied with Integrated Vehi-cle Solutions Group’s demand to re-move the programs from its CDK dealership management system platform, it claims.
‘Removed and purged’According to the suit, Rita Case
claimed that the group had paid a software engineer to “redevelop identical programs with the same functionality of the IVSG programs.”
But Integrated Vehicle Solutions Group spokesman Greg Euston said, “�ere is no evidence to support that claim and, regardless, that sort of du-plication would also be a breach of the licensing agreement.”
�e suit seeks compensatory and punitive damages, as well a court or-der requiring Integrated Vehicle Solutions Group’s programs to be “removed and purged.”
Kuko� said, “One of the things so puzzling to us is the actions taken by the Rick Case dealerships are inde-fensible — there doesn’t seem to a rational basis for them.” a
