OLR Bill Analysis

sHB 6682 (as amended by House A)*

AN ACT CONCERNING THE LICENSING OF NEW AND USED CAR DEALERS.

SUMMARY:

This bill allows a licensed motor vehicle manufacturer to sell the vehicles it makes directly to Connecticut consumers under certain conditions. It does so by authorizing the motor vehicles (DMV) commissioner to issue a new or used car dealer's license to a licensed motor vehicle manufacturer that meets certain requirements.

To qualify for a car dealer's license, a licensed manufacturer:

1. cannot have a franchise agreement with a new car dealer in the state;

2. must manufacture only electric vehicles, and sell at retail only vehicles it makes;

3. had to have been selling or servicing its line of motor vehicles in Connecticut as of January 1, 2014;

4. can sell new or used motor vehicles at no more than three state locations;

5. cannot hold a controlling interest in another manufacturer, or a subsidiary, affiliate, or entity owned or controlled by another manufacturer, that is licensed as a dealer under the bill; and

6. cannot be owned or controlled by another manufacturer, or a subsidiary, affiliate, or entity owned or controlled by another manufacturer, that is licensed as a dealer under the bill.

The bill exempts such a manufacturer from motor vehicle franchise laws (see BACKGROUND). Under the bill, a manufacturer is any person, firm, or corporation licensed as a motor vehicle manufacturer under state law, and any subsidiary, affiliate, or entity it owns or controls.

The bill expands the statutory definitions of new and used car dealers to include such a manufacturer and generally subjects the manufacturer to the rules governing dealers. It allows such a manufacturer, if it is licensed as a (1) new car dealer, to also repair vehicles and sell used vehicles, or (2) used car dealer, to also repair vehicles.

Current motor vehicle law bars manufacturers from holding a new or used car dealer's license, except:

1. the DMV commissioner may issue a used car dealer's license to a manufacturer primarily engaged in renting motor vehicles and industrial and construction equipment under certain conditions; and

2. a manufacturer may operate a dealership for up to one year (or two years if the commissioner makes certain determinations).

The bill also makes technical and conforming changes.

Tesla Motors is apparently the only manufacturer that currently meets the bill's criteria.

*House Amendment “A” replaces the underlying bill (File 361). It (1) adds the conditions on (a) holding a controlling interest in, or (b) being owned or controlled by, another manufacturer licensed under the bill's provisions; (2) exempts a manufacturer licensed as a car dealer under the bill from motor vehicle franchise laws that would otherwise apply; and (3) specifies, as one condition of licensing as a dealer, that a manufacturer sell at retail only electric vehicles it makes.

EFFECTIVE DATE: October 1, 2015

BACKGROUND

Motor Vehicle Dealer Laws and Regulations

Motor vehicle dealers are subject to laws governing vehicle licensing, registration, and recordkeeping, among other things.

DMV requires new and used car dealers to pay a biennial license fee of $700 and $560 respectively. New and used car dealers also must post a $50,000 cash or surety bond and comply with applicable state and federal laws. The commissioner may refuse to grant or renew a license if the dealer, an officer, or major stockholder has been convicted of violating any criminal laws pertaining to the business, or certain other crimes, such as fraud (CGS 14-52 & 52a).

Dealers must follow DMV regulations in such areas as use of dealer plates, record-keeping, motor vehicle guarantees, odometer readings, issuing vehicle registrations, and customer complaints (Conn. Agencies Reg. 14-63-1 et seq.).

Manufacturer

By law, a manufacturer is (1) a person, whether or not a Connecticut resident, engaged in the business of constructing or assembling new motor vehicles of a type required to be registered by the commissioner, for operation upon any highway, except a utility trailer, which are offered for sale in Connecticut, or (2) a person who distributes new motor vehicles to new car dealers licensed in Connecticut (CGS 14-1 (47)).

The law prohibits any person, firm, or corporation from engaging in the business of manufacturing motor vehicles without receiving a manufacturer's license, which expires biennially on June 30. Applicants for a manufacturer license must apply to DMV and pay a biennial license fee of $2,300 (CGS 14-67a).

Motor Vehicle Franchises and Dealerships

Under the laws governing motor vehicle franchises, a motor vehicle manufacturer makes or assembles new motor vehicles for distribution to dealers or through distributors. A dealer sells motor vehicles and holds a valid sales and service agreement, franchise, or contract with a manufacturer for retail sale of the vehicles (CGS 42-133r).

The motor vehicle franchise laws set out, among other things, the respective obligations of manufacturers and dealerships (CGS 42-133r - 42-133mm). It generally prohibits a manufacturer from unfairly competing with a dealer who sells the manufacturer's “line make” of vehicles (e.g., Toyota or Ford) and who is operating under an agreement or franchise with the manufacturer (CGS 42-133cc (8)).

COMMITTEE ACTION

Transportation Committee

Joint Favorable Substitute

Yea

26

Nay

5

(03/18/2015)