Bill Analysis - House Bill 403 Clarify Motor Vehicle Franchise Laws (August 10, 2021)

Summary

Bill analysis of House Bill 403, Clarify Motor Vehicle Franchise Laws, 2021-2022 General Assembly, prepared for the Senate Commerce and Insurance committee and dated August 10, 2021, as of the PCS to Second Edition. It lists Jones and Wray as the introducers and Amy Darden as the preparer. The overview says the bill prohibits conditioning approval of dealership transfers on a dealer's willingness to renovate, relocate, or enter into a right of first refusal, clarifies franchise provisions to facilitate dealers' ability to sell electric vehicles, and prohibits manufacturers from requiring dealers to purchase pre-owned vehicles. It says the PCS adds Sections 12-15, including a framework for online vehicle reservations or requests to purchase or lease.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

                                                     HOUSE BILL 403:
                                                     Clarify Motor Vehicle Franchise Laws.
      2021-2022 General Assembly
     Committee:     Senate Commerce and Insurance. If favorable, Date:          August 10, 2021
                    re-refer to Rules and Operations of the Senate
     Introduced by: Reps. B. Jones, Wray                           Prepared by: Amy Darden
     Analysis of:   PCS to Second Edition                                       Committee Counsel
                    H403-CSBB-12

     OVERVIEW: House Bill 403 makes the following changes to North Carolina's Motor Vehicle Dealers
     and Manufacturers Licensing Law:
            ➢ Prohibits conditioning approval of dealership transfers on dealer's willingness to renovate,
              relocate, or enter into a right of first refusal.
            ➢ Clarifies provisions regulating franchise agreements to facilitate dealers' ability to sell electric
              vehicles.
            ➢ Prohibits manufacturers from requiring dealers to purchase pre-owned vehicles.
            ➢ Requires manufacturer to buy a dealer's existing facility if it does not sell if the manufacturer
              or distributorrequired the dealer to relocate.
            ➢ Extends existing grandfather provisions allowing certain manufacturer incentive programs.
            ➢ Requires information be provided to dealers regarding how vehicle allocations are made by
              manufacturers.
            ➢ Clarifies provisions regarding reimbursement to dealers who provide loaner vehicles to
              customers having vehicles serviced when required by the manufacturer.
            ➢ Provides that certain dealer facility improvements required by a manufacturer in the 10 years
              preceding an incentive program comply with program requirements; addresses programs that
              are discontinued or revised.
            ➢ Makes clarifying changes to existing law regarding warranty obligations.
            ➢ Clarifies definition of motor vehicle dealer includes one who leases vehicles or offers vehicles
              for subscription.
            ➢ Prohibits manufacturers from requiring dealers to provide financial statements specific to a
              franchise or line-make if the dealer operates more than one franchise or sells more than one
              line-make.
     The PCS add Sections 12–15 to the bill which does the following:
            ➢ Creates a framework for online vehicle reservations or requests to purchase or lease.
            ➢ Allows electronic signatures on various documents for manufacturer vehicle loaner programs.
            ➢ Clarifies vehicle inspection requirements for transfer of vehicles between affiliated dealerships.

                                                                                                                                                             Legislative Analysis
     Jeffrey Hudson
                                                                                                                                                                   Division
         Director                                  H403-SMBB-47(CSBB-12)-v-3                                                                                   919-733-2578
This bill analysis was prepared by the nonpartisan legislative staff for the use of legislators in their deliberations and does not constitute an official statement of legislative intent.
House PCS 403
Page 2

   ➢ Clarifies delivery and execution of prepared documents at a customer's home or place of
     business do not violate the requirement conducting motor vehicle sales at an established
     salesroom.
BILL ANALYSIS: The PCS of House Bill 403 makes the following changes to motor vehicle dealer and
manufacturer licensing laws:
Dealership transfer clarifications. Section 1 makes clear that a manufacturer may not condition its
approval of a dealership transfer on the dealer's willingness to renovate or relocate or enroll in a facility
program, or on the dealer's willingness to enter into a right of first refusal in favor of the manufacturer. It
also makes other organizational, technical, and clarifying changes to existing provisions.
Electric vehicles. Section 2 adds clarifying language to provisions regulating franchise agreements
regarding electric vehicles. It provides that establishment by a manufacturer of a separate franchise for
sale of electric vehicles is considered a change in an established plan of distribution, such that it would
have to be offered to its franchised dealers in the same line-make. It also prohibits the manufacturer from
coercing franchised dealers to purchase more charging stations than are reasonably necessary or requiring
the purchase of unnecessary diagnostic equipment. This section also amends the definition of motor
vehicle in the dealers and manufacturers licensing law to clarify a motor propelled vehicle includes motors
of all sizes, types, and sources of power.
No requirement to purchase pre-owned vehicles. Section 3 makes clear that a manufacturer is prohibited
from requiring a franchised dealer to purchase off-lease or pre-owned vehicles.
Dealer relocation. Section 4 provides that, if a dealer is required by a manufacturer or distributor to
relocate, the manufacturer or distributor is required to buy the dealer's existing facility if it does not sell
within 180 days of listing or 90 days after the facility relocation. The purchase price would be fair market
value as determined by an appraiser agreed upon by the dealer and manufacturer or distributor.
Incentive program grandfather extension. Section 5 extends for three years, from 2022 to 2025, existing
grandfather provisions that allow for certain manufacturer incentive programs.
Vehicle allocation. Section 6 requires manufacturers to establish a process for its franchised dealers to
appeal vehicle allocations.
Loaner/rental car reimbursement. Section 7 makes clarifying changes to an existing provision prohibiting
a manufacturer from failing to reimburse its dealer for the cost of providing a loaner car to a customer
having a vehicle serviced if required by the manufacturer. This section clarifies the manufacturer must
provide full reimbursement regardless of whether the loaner or rental vehicle is a similar model to the one
the customer is having serviced and when all or part of the time the loaner or rental is provided is due to
the unavailability of a part provided by the manufacturer. It also clarifies that reimbursement includes
applicable taxes and third-party fees.
Facility expenditures/incentive programs. Section 8 provides that a dealer is in compliance with a
manufacturer's incentive program requiring facility improvements if improvements that were required or
approved by the manufacturer were made within the preceding 10 years. It also provides for continued
eligibility for certain facility benefits under a prior program that is revised or discontinued over the 10-
year period.
Warranty requirements. Section 9 makes clarifying changes to existing law related to dealer warranty
obligations.
House PCS 403
Page 3

Motor vehicle dealer definition. Section 10 amends the definition of motor vehicle dealer in the dealers
and manufacturers licensing law to specifically include a person who leases vehicles at retail or offers
vehicles for subscription.
Dealership financial statements. Section 11 prohibits a manufacturer from requiring its dealers to provide
financial statements specific to a franchise or line-make if the dealer operates more than one franchise or
sells more than one line-make.
Dealer Manufacturer Partnership for Online Sales. Section 12 creates a framework to permit retail
customers the option of reserving or requesting to purchase or lease a vehicle online.
Electronic Signatures. Section 13 allows electronic signatures on various documents for manufacturer
vehicle loaner programs.
Affiliate Dealer Inspection Requirement. Section 14 provides that a previously inspected vehicle for sale
is not required to be reinspected if the vehicle was transferred to an affiliated dealership and the inspection
occurred within 180 days from the date of sale or within 300 miles from the mileage recorded at the date
of sale.
Limited Off-Premises Sales Activities. Section 15 clarifies that delivering a sold or leased motor vehicle
to the home or business of a customer and executing relevant paperwork does not violate the requirement
for motor vehicle sales to be conducted at an established salesroom.
Section 16 of the bill is a severability clause providing that if any part of the act is found to be invalid, the
remaining provisions are still in effect.
EFFECTIVE DATE: Sections 1-11 and Sections 13-16 of this act are effective when they become law,
and provisions apply to all current and future franchises and other agreements between new motor vehicle
dealers and manufacturers or distributors. Section 12 is effective January 1, 2022, and applies to all
existing and future programs and policies of all manufacturers and distributors on or after that date. Except
as otherwise provided, this act becomes effective when it becomes law.
**Wendy Ray, Staff Attorney, substantially contributed to this summary.


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