Electric Vehicle Legislation Must Preserve State Vehicle Franchise Laws and Consumer Affordability

Published March 15, 2021
ISSUE

The key to advancing consumer adoption of electric vehicles (EVs) is a strong partnership of vehicle manufacturers and retailers with a wide and competitive distribution network, which will help drive vehicle affordability and consumer demand. Based on the states’ interest to protect consumers, preserve price competition, support local jobs and provide local and state tax revenue, states have held the right to license and regulate the distribution, sale and service of vehicles within their state, including EVs. During consideration of legislation that would promote deployment of electric vehicles, Congress must preserve the states’ traditional role to license and regulate vehicle commerce, provide consumer protections and promote vehicle price competition within its borders.
 
BACKGROUND

Congress may consider legislation to encourage greater EV adoption this year as part of a scaled back “Build Back Better” agenda. Dealers are essential to promoting widespread consumer adoption of EVs and ensuring price competition and market success. There may be attempts to preempt state vehicle franchise laws that provide an efficient and cost-effective method for selling and servicing vehicles, based on the false premise that selling EVs is fundamentally different than selling internal combustion vehicles.
For decades, state vehicle franchise laws have included important consumer protections and regulated the disparity in size and power between local dealers and multinational automakers to help level the economic playing field. With new risks and opportunities associated with EVs, the state regulatory frameworks that protect consumers are especially important as unproven startups, including overseas entrants, emerge in the U.S. auto market.
 
KEY POINTS

  • Any EV legislation considered by Congress should preserve the state’s right to license and regulate the distribution of vehicles within its borders. These rights are reserved to the states under the 10th Amendment to the Constitution.
  • Franchised auto dealers with a wide distribution network under state vehicle franchise laws will be critical to the rapid adoption of electric vehicles. More than 16,000 U.S. franchised dealers, who use their own capital to invest in personnel, land, buildings, and vehicle inventory, create strong competition that makes vehicles more affordable for consumers – a critical element that is necessary for electric vehicles to gain greater consumer acceptance.
  • There is an important public policy rationale for Congress to preserve state vehicle franchise and licensing laws, as these laws are based on the states’ interest to provide consumer protection, vehicle price competition and convenient service networks to support vehicle owners especially for warranty and recalls.
STATUS

Provisions promoting the adoption of EVs were included in the Build Back Better Act (H.R. 5376) which the House passed in November. Congress must ensure that a state’s traditional role to provide consumer protections, and the licensing and regulation of vehicle commerce, including EVs, within its borders is preserved.