Mississippi Governor Tate Reeves recently signed a bill restricting the sales of electric vehicles to franchised dealerships in the state. This bill, known as House Bill 401, was introduced by Rep. Trey Lamar, and got large pushback from Republicans. House Bill 401 has some significant ramifications for EV dealers, so read on to find out more.
What the New Law Entails
The newly passed House Bill 401 requires that every EV manufacturer not sell their vehicles through direct sales but through franchises. Governor Reeves has indicated that the ultimate goal of this law is to establish a level playing field among automakers, ensuring uniform adherence to regulations across the industry. Notably, the current structure enables Tesla to circumvent state franchise regulations due to its single facility within the state being categorized as a store rather than a traditional franchise outlet. To learn more, you could consult attorney Jason W. Power of Franchise.Law.
Governor Reeves signed the law to restore the fifty-year-old interpretation of Mississippi’s auto dealer franchise law. It reassures the small businesses in communities across the state that big manufacturers cannot destroy their businesses.
Also, he indicates his understanding of the fact that innovation in the industry is inevitable, which will eventually breed new companies with new business models. The bill, the Governor says, exists due to his commitment to finding long-term solutions in an ever-changing market.
What Critics Are Saying
Despite his good intentions, critics of the bill say the bill might likely do the opposite of what it is intended. For instance, it would give Tesla an unfair advantage against competitors like Lucid and Rivian.
Moreover, even before the bill passed in the Senate, there was fierce debate among supporters of the legislation and those with worries. Some are worried that the bill could push away investments. One of those not in support of the bill is Senator Joey Fillingane, who stated that it could cause the state to lag behind others.
According to Fillingane, this bill could mean the state would be last yet again. He cautions that they could deprive their citizens of invaluable opportunities if they do not tread lightly.
Tesla stood against the bill, advocating that the state should focus on increasing revenues and jobs. House Bill 401 threatened to block Tesla and other EV manufacturers from setting up shop any longer in Mississippi. Meanwhile, if this happens, it will force many locals out of the state to buy the top-selling EVs in the country.
The IADA’s Argument
While that was happening in Mississippi, a judge in Illinois ruled that Rivian and Lucid could carry on direct sales of vehicles. However, the IADA (Illinois Automobile Dealers Association) appealed this ruling that allowed direct customer sales. Meanwhile, the OEM had filed a motion to dismiss the lawsuit the IADA filed, contending against the direct sales model, which the ruling granted.
According to the OEM, the lawsuit goes against the Illinois Motor Vehicle Franchise Act and the state’s vehicle code. When asked for his opinion, the attorney general opined that the laws contained no such requirement. Also, they did not prohibit any newly established manufacturer from selling directly to customers. It seems that the air around this matter still needs to settle before people can make informed decisions.
Still, the IADA argued that Illinois law requires a franchisee to contract with a manufacturer to sell.
Conclusion
The Governor of Mississippi has signed legislation restricting automakers from directly selling EVs to customers. According to Gov. Tate Reeves, the law protects smaller automobile manufacturers' interests. However, critics argue that the law gives big companies like Tesla an edge over their competitors.
House Bill 401 is a move towards upholding the traditional franchise model in Mississippi's automotive sector. However, balancing the need for fair competition while safeguarding local businesses will be a key challenge in implementing this legislation.
