Toyota Scammed Customers With Maintenance Plan: Lawsuit

Good morning! It’s Wednesday, March 27, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

Even EVs Can’t Get A Break From The Heat

Contents

1st Gear: Toyota Sued For Maintenace Plan Scam

A woman in California is suing Toyota Motor Credit Corp. and the automaker itself. She is alleging one of Toyota’s dealerships sold her a maintenance plan for 10 service visits and exaggerated the combined savings it would have over the life of the coverage by hundreds of dollars in comparison with the cost of the service she got.

Back in 2020, Solis bought a certified pre-owned 2019 RAV4 from Santa Margarita Toyota in Rancho Santa Margarita, California. She added the optional ToyotaCare Plus maintenance plan that was valid for five years or up to 55,000 miles, financing the $1,025 coverage along with the vehicle itself through Toyota Motor Credit in a 72-month loan with 4.7 percent interest.

According to the lawsuit, she bought the maintenance plan based on the fact the dealer told her it would save money. From Automotive News:

Teresa Solis’ Southern District of California lawsuit did not count as defendants either of the California dealerships mentioned in her allegations, though the case involves 100 unknown “Doe Defendants” to be named later. She claims a Toyota dealership other than where she purchased the contract skipped four of the services and charged her for filters that were supposed to be covered.

Solis’ case accuses the defendants of one count of unjust enrichment, one count of fraud, one count of negligent representation, one count of violating the Magnuson-Moss Warranty Act, one count of violating the Lanham Act, two counts of violating the California Business and Professions Code and one count of breach of contract.

She also seeks class-action status for everyone who purchased a maintenance plan within 90 days of buying a vehicle from the defendants.

Here’s a breakdown of the service she got and what the dealership told her:

Solis was allegedly told the plan covered seven regular services and three major services occurring at 5,000-mile intervals starting at the 10,000-mile mark — her vehicle had 6,801 miles on the odometer at the time of purchase — and continuing through 55,000 miles. She could redeem the coverage for major services at 15,000, 30,000 and 45,000 miles.

“Toyota told Plaintiff that each Regular Service typically costs $100, and Major Services cost $400,” Solis’ lawsuit stated. “Thus, Defendants represented that Plaintiff’s Maintenance Plan was valued at $1,900.”

But when she brought the RAV4 to Toyota Carlsbad in Carlsbad, Calif., for the 20,000-mile regular service in July 2022, the store allegedly conducted the 30,000-mile major service and billed Toyota only $210. If she had bought the work at the retail price charged consumers, the bill would only have been $380 — also less than the purported $400 the Santa Margarita store had indicated, according to the lawsuit.

At 29,500 miles, Solis brought the RAV4 in for the 30,000-mile major service but allegedly only received the 35,000-mile regular service. Toyota Carlsbad allegedly only charged Toyota $30 and would have only charged her $43 if she paid retail — both less than the $100 she had been told.

“Plaintiff started to recognize a consistent pattern whenever she brought her car in for service,” the lawsuit stated. “Often, the dealership would skip scheduled services and bill Toyota amounts less than the value Plaintiff was told when she purchased the Maintenance Plan. She also realized the cash price for her scheduled services was less than the value Plaintiff was told by Defendants when she purchased the Maintenance Plan.”

[…]

Solis’ lawsuit estimates she’d only have paid between $800 and $900 compared with the $1,900 quoted. Solis’ attorney, John Ternieden, an associate at Singleton Schreiber in Sacramento, Calif., said in an email to Automotive News that “not all regular services were the cash price of $43 …. nor were all major services $380.” Other major services were less than $200 each, he wrote.

“In total, between the seven services our client actually received (which Toyota told her represented the entirety of her plan), the actual cash price would have been less than the price of the maintenance plan,” Ternieden wrote in an email March 11.

The lawsuit said Toyota Carlsbad skipped the regular services for 20,000, 25,000, 40,000 and 55,000 miles that were supposed to be covered by the plan.

The lawsuit said Solis asked the service department about the lower-than-claimed charges and the premature service, and a representative said that “everything was being done as it should, and that Plaintiff was getting exactly what she paid for in the Maintenance Plan.”

At the 45,000-mile mark, the dealership told Solis she only had one more service remaining, not the two she expected, and it said she needed to pay for cabin and air filters even though those expenses were supposed to be included, the lawsuit said.

Even if Solis received all 10 services she was due under the plan, the $1,025 coverage would still have cost more than paying for the work retail, Ternieden said.

Usually, prepaid maintenance plans give buyers a bit of a discount over buying each service as you go, but it looks like that was certainly not the case in this situation.

It’ll be interesting to see if more folks come out of the woodwork saying they didn’t get what they paid for.

2nd Gear: Hyundai Investing Big In EVs

Hyundai Motor Group is planning to spend 68 trillion won ($51 billion) and hire about 80,000 new employees over the next three years as the automaker pushes further into being an electrification leader. From Reuters:

More than half of the investment, or 35.5 trillion won, will be allocated for new research and development infrastructure and assembly lines for electric vehicles, the group said in a statement.

Another 31.1 trillion won will be slated for research and development in electric vehicles, including software-defined vehicles (SDVs) and battery technology, it said.

A majority of the new jobs created will be to promote future business, with 44,000 new staff in electrification, SDVs and carbon neutrality, it said.

[…]

Automotive parts maker Hyundai Mobis and Hyundai Engineering & Construction are also under the conglomerate.

The planned investments will be going to all three prongs of Hyundai Motor Group: Hyundai, Kia and Genesis. Together, they combine to be the world’s number three automaker by sales.

3rd Gear: China Files WTO Complaint Over U.S. EV Subsidies

China is not happy with the U.S. over its electric vehicle subsidies, and now it’s taking the matter to the World Trade Organization. The country is challenging elements of President Biden’s 2022 Inflation Reduction Act.

China claims IRA rules are “discriminatory” and have “seriously distorted” the global EV supply chain. Ambassador Katherine Tai, the U.S.’s top trade official, responded to the WTO complaint by saying China continues to use “unfair” policies and practices to undermine fair competition and dominate global markets. From Bloomberg:

The EV sector has increasingly been caught up in tensions over trade and geopolitics as the world transitions away from the internal combustion engine. The European Union is likely to impose additional tariffs on EVs imported from China due to accusations of unfair subsidies, while world-leading Chinese battery firms have run into resistance from Washington.

The complaint comes months after the US finalized restrictions that reduced the number of electric cars eligible for as much as $7,500 purchase tax credits. The guidelines that went into effect beginning this year will eventually mean that vehicles containing battery components or raw materials sourced from “foreign entities of concern” will no longer qualify for credits.

[…]

Under guidelines the Biden administration released late last year, any company that is subject to the jurisdiction of China’s government, or is controlled by the government — including if it’s at least 25% owned by a Chinese government authority — is considered an FEOC. The restrictions also apply to all production inside of China.

However, foreign subsidiaries of privately owned Chinese companies in non-FEOC countries, such as Australia or Indonesia, will be allowed so long as they’re not controlled by the Chinese government.

“Legally speaking, China does have a point in that the IRA does violate WTO rules, a point that the EU also made,” said Henry Gao, a law professor at Singapore Management University who researches Chinese trade policy.

Gao noted that President Xi Jinping recently praised China’s efforts to promote the global energy transition, saying that China should push for the establishment of a fair, just, balanced and inclusive global energy governance system.

Still, the lawsuit is not likely to force the U.S. to change its policy. Honestly, that’s too bad. I honestly do not think China wants to send EVs over here to get our data. They probably already have it, and their EVs are really really good for the most part.

4th Gear: EV Owners Unhappy With Fast Tire Wear: J.D. Power

Electric vehicle owners are starting to notice their tires wear faster than the rubber fitted to internal-combustion-powered vehicles, a new study from J.D. Power found. The reason is simple: EVs are heavier and more powerful (mostly) than ICE counterparts. From Automotive News:

Findings from the study highlight EV owners having less satisfaction with the durability of their tires, expecting them to wear similar to gasoline-powered vehicle tires.

[…]

This gap in satisfaction creates an opportunity for tire manufacturers and automakers to ensure EV owners are properly educated, Ashley Edgar, senior director of benchmarking and alternative mobility at J.D. Power, said in a statement.

“Because of the inherit conflict of maximizing vehicle range and optimizing tire wear for EVs, tire manufacturers and automakers need to work together to overcome the challenge without completely sacrificing tire performance in other areas, especially as the EV market continues to increase,” Edgar said.

This increased tire wear is actually changing the way car dealers perform services since tire maintenance has to be done more often, and there’s less to do on EVs than ICE vehicles.

In the 2023 CDK Global white paper “EV Service: Today and Tomorrow,” 18 percent of dealership leaders polled said tire maintenance would be the most common service concern for EV owners, tied for second with technical issues with the vehicle display system. Thirty-eight percent of those surveyed said they believed software issues would be the top concern.

Recommended service schedules for most EVs include an annual inspection and tire rotations. For the Ford Mustang Mach E, a rotation annually or every 10,000 miles is recommeded; for the Hyundai Ioniq 6, it’s every year or 8,500 miles; and for the GMC Hummer EV pickup, it’s every 7,500 miles regardless of time, CDK said.

Because of this, being in the tire business will be crucial for service departments. As one dealership manager told CDK: “When it comes to EVs, tires are the new oil change.”

The U.S. Original Equipment Tire Customer Satisfaction Study assesses tire owner satisfaction in four areas: tire ride, tire wear, tire traction/handling and tire appearance. The 2024 study was conducted between August and December of 2023; the 31,414 respondents were owners of 2022 and 2023 model-year vehicles. The four segments of the study were luxury, passenger car, performance sport and truck/utility.

Sure, tires are wearing out oddly quickly, but do you really expect me to drive an EV that weighs less than 10,000 pounds and accelerates slower than three seconds to 60? I don’t think so, pal.