By Ben Jervey
As federal support for electric vehicles (EVs) is expected to wither under the Trump administration, state-level policies will play the biggest political role in how quickly battery powered motors replace the internal combustion engine.
Yet, at this critical moment when state governments should be supporting zero-emission vehicles, many states are cutting their incentives, while others are penalizing EV drivers outright.
In a recent article for the New York Times, Hiroko Tabuchi explores a number of efforts underway in state capitals across the country that are making the transition to electric cars a steeper uphill climb.
These speed bumps take two main forms:
1. The canceling of tax credits that support EV sales and leases.
2. New registration fees that disproportionately penalize battery-powered vehicles.
These legislative attacks on EVs bear the fingerprints of Big Oil, which sees the electrification of the transportation sector as the biggest single threat to the oil industry. Groups funded by the likes of ExxonMobil and the Koch brothers are supporting the measures and in some cases, even writing the bills.
State Financial Support for EV Sales Slacking
Over the past decade, nearly half of all of the states and the District of Columbia have had some kind of financial incentive for EV sales on the books—typically in the form of an income tax credit or a straight-up rebate. But this support is fading, as some states cancel the incentives and others let them expire.
Today, only 16 states (plus the District of Columbia) still offer tax credits or rebates and at least two states are voting in the current legislative session on whether or not to extend or repeal the benefits.
In Utah, a bill that would have extended the state's EV tax credit (of up to $1,500) through 2021 was just voted down, failing by a single vote. Meanwhile, in Colorado, which had offered the country's most generous EV incentive, legislators will soon vote on a bill that would cancel the $6,000 tax credit for purchasers of EVs.
As Tabuchi noted:
"The measure in Colorado has been backed publicly by Americans for Prosperity, an advocacy group founded by the conservative billionaire brothers David H. and Charles G. Koch, whose wealth is founded on their petrochemicals empire."
The rollback of sales incentives has come at the same time as many states are introducing new fees that directly penalize plug-in owners for their choice to drive zero emission vehicles that charge off the local electric grid.
Registration Fees for EVs
Coming into the 2017 state legislative sessions, 10 states impose extra fees to register electric vehicles.
National Conference of State Legislatures
This year, policymakers in nine states have introduced legislation that would charge a higher rate for EV registrations than for conventional internal combustion vehicles. (Another state, Illinois, is debating a bill that would raise the EV registration rate, which is currently lower, to match gas-powered vehicles).
Kansas and Indiana are both debating a $150 annual fee. Montana started out with a bill featuring a $300 annual fee, but that was negotiated down to $95 per year, which passed their house and has moved into the state senate. New Hampshire, South Carolina, Minnesota, Arizona and even California have some sort of EV fee winding through the legislature.
Proponents of higher EVs fees say that they are necessary to ensure that plug-in cars pay their fair share for the roads. Typically and universally within the U.S., highway funds are raised from revenue from gasoline taxes. Because EV drivers don't buy gas, they aren't chipping in for those highway funds.
However, the Sierra Club's Electric Vehicles Initiative director, Gina Coplon-Newfield, told DeSmog that this argument fails the tests of basic math, saying, "When you look at the financial numbers, they don't add up at all."
First of all, Coplon-Newfield noted, "conventional vehicles have become far more efficient" and aren't consuming as much gasoline and therefore aren't generating as much revenue for the highway funds. Second, "gas tax charges have not been in sync with inflation."
Coplon-Newfield gives the example of North Carolina, where the state is hoping to raise millions for their highway fund. If you raised the gas tax by one cent per gallon, the state would raise an extra $7.5 million. Contrast that with the total revenue raised from EV registration fees in 2014: $440,000. Even if the state is registering three times as many EVs today, it's still millions short of the goal.
There are other reasons that EVs should be given a break on registration fees—they actually cause less road damage given their light weight and improve air quality and benefit public health because they don't have tailpipes.
Georgia: A Cautionary Tale
For a look at what happens when a state both kills incentives and starts charging EV drivers extra fees, you only have to look to Georgia.
Just three years ago, Georgia was an unlikely national leader in electric vehicle sales, boosted by one of the nation's most generous state-level EV tax incentives that offered drivers a tax credit of up to $5,000 when buying a plug-in vehicle. By early 2014, Georgia trailed only California in EV registrations. Then, in January 2015, a new measure slipped into the state's $1 billion transportation bill which killed the credit and added another $200 annual fee for EV drivers.
Electric car sales immediately fell off a cliff.
Overall EV sales dropped by 90 percent and sales of the Nissan LEAF are off nearly 95 percent, according to Don Francis, the coordinator of Clean Cities-Georgia and executive director of the Partnership for Clean Transportation.
Here's how Atlanta Magazine described the history of the legislation:
"In January 2015, state Representative Chuck Martin, an Alpharetta Republican, introduced a bill to kill the state credit partly on the argument that it gave electric vehicles an unfair advantage over other low-emission cars such as the Chevrolet Volt. Martin's measure got lumped into the $1 billion transportation bill, which raised the state's gas tax to pay for road improvements. As if that weren't enough, lawmakers slapped electric vehicle owners with an additional $200 annual fee on the logic that it wasn't fair to make drivers of gas-powered vehicles bear the entire cost of road maintenance. When the new laws went into effect on July 1, the emerging electric vehicle market was immediately eviscerated. Statewide registrations plummeted from 1,338 in June to 115 in October."
But there's more to the story. Martin's bill looks similar to model bills that have been pushed by the American Legislative Exchange Council (ALEC), a Koch-funded entity that pushes fossil fuel–friendly agendas through state legislatures.
As the Center for Media and Democracy has noted, ALEC recently began pushing the Koch's anti-EV agenda:
"At the American Legislative Exchange Council (ALEC) meeting in Scottsdale, Arizona in December 2015, the Energy, Environment and Agriculture Task Force heard a presentation on 'State and Federal Subsidies for Electric Vehicles,' then voted on a resolution to discourage states from providing subsidies, the 'Resolution Regarding Subsidies for Electric Vehicles.' The Kochs have long funded ALEC. Koch Industries has had a seat on ALEC's 'Private Enterprise' board for years, while Koch network entities like Freedom Partners, Americans for Prosperity and Koch-funded 'think tanks' have seats on a number of task forces where they get a vote on bills."
Meanwhile, also in 2015, Georgia started charging EV drivers extra registration fees. The extra $200 per year to register the vehicle probably doesn't have the impact of losing the $5,000 tax credit. But it sure doesn't help.
As evidenced in the registration numbers pictured in the chart above, Georgia is no longer a national leader in electric car sales. In Georgia and nationwide, the transition to electric cars seems inevitable. It just might take a decade or two longer if left to market forces alone. In terms of public health and the climate, those years shouldn't be wasted.
As Coplon-Newfield put it, "Now is the time to be incentivizing, not penalizing, electric vehicles."
Reposted with permission from our media associate DeSmogBlog.
By Daniel Gatti
The state of Connecticut is a progressive state, with a strong track record of support for laws and policies that will reduce global warming emissions and a goal of putting more than 150,000 electric vehicles (EV) on the road by 2025.
Given the policy commitments of the state of Connecticut, one might assume that Connecticut would be a place that would welcome an innovative, important business like Tesla, the largest manufacturer of electric vehicles in the U.S. And given the significant fiscal challenges that Connecticut faces, one might think that Connecticut would be excited to see Tesla operate new stores within the state, bringing jobs and tax revenue.
But in fact, Tesla is legally prohibited from operating its Tesla stores in Connecticut.
Under Connecticut's dealer franchise law and under the law of many states throughout the country, automobiles may only be purchased through independent car dealerships. Tesla's cars are sold directly from the manufacturer, which mean that Tesla stores are not welcome in Connecticut.
The problems that Tesla has faced with automotive dealers and state dealer franchise laws represent a combination of unintended consequences, special interest influence and the challenges of developing new technologies in marketplaces dominated by entrenched interests and outdated laws. The Tesla wars are also a part of a broader story of how changes in technology are impacting laws and regulations governing transportation in the U.S.
Why Do We Have Dealer Franchise Laws?
The car dealership model as we know it today arose in the 1920s and 1930s, as first General Motors and then eventually all of the "Big Three" American automakers chose to license the rights to sell their cars to independent dealers, rather than selling the cars directly to consumers.
The independent dealership model worked because it allowed both parties to focus on core competencies: The manufacturers could focus on making the best cars possible, while independent dealers made the inroads into local communities that allowed them to most efficiently sell the cars directly to consumers.
From the beginning, one challenge in the independent dealership model is the obvious power imbalance between the "Big Three" automakers who dominated automobile manufacturing and the thousands of independent dealerships that were licensed to sell their vehicles. Stories abounded of auto manufacturers exploiting their superior market position to gain unfair advantages on independent dealers. For example, manufacturers could force independent dealers to purchase cars that they didn't want as a condition of maintaining their relationship or terminate the franchise relationship at will without cause or coerce profitable dealerships into selling their business at below-market rates.
Beginning in the 1930s and accelerating greatly in the 1950s, legislatures in all 50 states passed a series of laws, known collectively as dealer franchise laws, which were intended to protect independent dealers from abusive practices at the hands of vehicle manufacturers. Among other things, these laws prohibited the "Big Three" from owning licensed dealerships themselves or selling cars directly to consumers.
The prohibition on direct manufacturer sales was intended to protect independent auto dealers from unfair competition from their own manufacturers. The classic concern addressed by the ban on direct sales from manufacturers is the independent car dealer who spends money, time and effort building a market for, say, Ford vehicles in a certain town, only to have Ford Motor company jump in and open up a rival direct from manufacturer store that undercuts the independent dealer on price and takes his market share.
By the 1950s when most of these laws were passed, the independent dealer model was so entrenched in the American car market that it was simply presumed that all auto manufacturers would have independent dealerships selling their cars and that any direct manufacturer sales would necessarily be in competition with an independent dealership. Dealer franchise laws therefore did not contemplate the challenge posed by a company like Tesla, a company that refuses to sell its cars to independent dealerships at all and instead insists that all sales must be direct from the manufacturer itself.
Why Doesn't Tesla Distribute Through Franchised Dealers?
Tesla has adopted this policy because they believe that the traditional independent dealership model does not work for electric vehicles.
According to Tesla CEO Elon Musk:
"Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. This would leave the electric car without a fair opportunity to make its case to an unfamiliar public."
Tesla points to the failure of Fisker and Coda as examples of electric vehicle start-up companies that failed because of their reliance on independent dealerships to sell a new technology. In addition, Tesla argues that because electric vehicles have lower maintenance costs than traditional cars, independent dealerships that make money off of service will always have an incentive to steer consumers away from electric vehicles. Tesla offers service for all of their vehicles for free.
Recent studies confirm that, with a few exceptions, most auto dealers in the Northeast are not making enough of an effort to sell electric vehicles. Between January and June of 2016, dealers in the Bridgeport to New York City metro area had 90 percent fewer EVs listed for sale than Oakland, when adjusted for relative car ownership. A recent report by the Sierra Club found that Tesla stores provide EV customers with far superior service, as Tesla was more likely to have EVs available to test drive, more likely to be knowledgeable about state and local incentives and more likely to be able to correctly answer technical questions about charging EVs, than traditional car dealerships.
A Tesla store looks and feels more like an Apple store than a car dealership. They are placed in high volume, high traffic areas such as shopping malls. They have almost no inventory, as Tesla cars must be ordered individually from the manufacturer rather than sold on site. There is no haggling over price. And Tesla stores sell only Tesla products, including cars and batteries; with the recent merger with SolarCity, Tesla stores will soon sell solar panels as well.
Why Do Some States Allow Tesla Stores and Others Do Not?
Over the past few years, courts and legislatures across the country have struggled with the question of whether and how to apply dealer franchise laws to Tesla stores. Some state courts, including Massachusetts and New York, have found that dealer franchise laws are only intended to apply to manufacturers that have licensed independent dealers and do not provide a cause of action against Tesla stores. Other states, including New Hampshire and Maryland, have recently changed its law to permit Tesla stores through legislation.
States that currently ban Tesla stores include Texas, West Virginia, Utah and Arizona, in addition to Connecticut. Some states, including Virginia and Indiana, allow a limited number of Tesla stores. New Jersey proposed a regulation that would have banned Tesla stores in 2015, but then relented last year, amending the regulation to allow four stores in New Jersey.
Often the difference between a jurisdiction that permits Tesla stores and a jurisdiction that bans Tesla stores comes down to minute differences in statutory language. For example, until 2014 Michigan's dealer franchise law prohibited auto manufacturers from "[selling] any new motor vehicle directly to a retail customer other than through its franchised dealer."
The word "its" in the statute arguably suggests that the law only applies to manufacturers that have franchised dealers and thus does not prohibit Tesla stores. But then a legislator allied to the auto industry slipped a provision into an unrelated piece of legislation removing the word "its" from the statute and just like that, Tesla stores were banned in Michigan.
Beyond narrow questions of statutory interpretation, judges and legislators wrestling with these questions need to consider the purpose of dealer franchise laws. Are these laws meant to regulate a relationship that arose within the context of the independent dealer system? Or are these laws intended to mandate that the independent dealer system must be the only way automobiles are sold in the U.S. forever? If it is the latter, then the dealer franchise laws represent not only a ban on Tesla, but a ban on all innovation in distribution methods.
Can such a ban be justified?
Daniel Gatti is a policy analyst for the clean vehicles program at the Union of Concerned Scientists.
