OLR Bill Analysis

sHB 6682

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

SUMMARY:

This bill allows the motor vehicles commissioner to issue a new or used car dealer's license to a licensed car manufacturer or person, firm, or corporation controlled by one, that:

1. does not have a franchise agreement with a car dealer in the state;

2. manufactures only electric vehicles;

3. sells only motor vehicles that it makes;

4. was selling or servicing its line of motor vehicles in the state as of January 1, 2014; and

5. sells new or used motor vehicles at no more than three locations in the state.

The bill also expands the statutory definitions of new and used car dealers to include such a manufacturer, and generally subjects them 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 motor vehicles 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. temporarily, to operate a dealership for up to one year (or two years if the commissioner makes certain determinations).

Because the bill applies only to manufacturers who do not have a franchise in Connecticut, a law prohibiting manufacturers from unfairly competing with a dealership with whom they have a franchise agreement does not apply (see BACKGROUND).

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

EFFECTIVE DATE: October 1, 2015

BACKGROUND

Motor Vehicle Dealer Laws and Regulations

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

The Department of Motor Vehicles (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 (Connecticut Agency Regs. 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 this state, or (2) a person who distributes new motor vehicles to new car dealers licensed in this state (CGS 14-1 (47)).

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 law generally prohibits manufacturers from unfairly competing with a dealer in the same line make (e.g., Toyota or Ford) operating under an agreement or franchise from the manufacturer (CGS 42-133cc (8)).

COMMITTEE ACTION

Transportation Committee

Joint Favorable Substitute

Yea

26

Nay

5

(03/18/2015)