Power Up and Get Going
By Jeff Jones and Anastasia Gordon
New York has set ambitious goals to increase the sales of electric vehicles (EVs) to New Yorkers, but with the exception of five downstate Tesla outlets, New Yorkers can’t buy a Tesla at retail stores upstate or out-of-state, nor can they buy EVs from other manufacturers like Rivian directly from sales locations. This is because of current New York law that limits the number of certified EV sellers. ACE NY is supporting legislation that would fix this.
Why does this restriction exist in the first place?
The dealer-franchise sales model emerged in the early 1900s as the auto industry was just getting started. It enabled early automakers to focus on production, while dealerships managed the sales. As a system, it made sense.
But dealer protections now force manufacturers of new vehicle technologies into a business model that doesn’t work well today. The franchise dealership model is incompatible for EVs two reasons. First, EV startups are focused on made-to-order production for individual customers, rather than the high-volume production and sales that traditional automakers rely on. Second, electric vehicles require significantly less servicing, in contrast to the frequent and expensive servicing for internal combustion vehicles that dealerships rely on for over half of their gross profits.
Fortunately, this is straightforward problem to remedy: New York should allow manufacturers that make only EVs to sell directly to New Yorkers at retail stores. By adjusting state law and enabling EV startups to perform direct sales, New Yorkers can buy the electric vehicles they want in their home state, and emerging companies can sell their cars in New York without disrupting how traditional automakers and dealerships do business.
Companies interested in selling EVs directly in New York include Tesla, Rivian Automotive, Lucid Motors, and Lordstown Motors, among others. These exciting companies are creating thousands of domestic manufacturing jobs, but they will only succeed if they are able to bring their vehicles to market. Note: Tesla has a 5-store exemption to this rule, so if you’ve seen a Tesla retail location, that’s why.
What does this change mean in the long-term?
Approximately 80 percent of EV’s currently sold in the U.S. are via direct sales from manufacturers. So, most important, especially when it comes to meeting climate ambitious climate goals, direct sales mean more EVs on the road, and more convenient, choices for New York consumers.
• Meeting EV Sales Goals: New York has a goal of putting 850 thousand EVs on the road by 2025, and 2 million by 2030. So far, the state is only 7% of the way to meeting this goal—in part because of the restrictions on direct sales. By comparison, the state of Florida, (which is open to direct sales but does not have other state EV incentives) has EV sales that are 1.5 times higher than New York, with the same population.
• Bring All EVs to All New Yorkers: The current cap of five Tesla retail locations means that all current stores are located in or around New York City. Any consumer wishing to purchase from another dedicated EV manufacturer must travel out of state to do so.
• No Harm to Existing Business Models: Lifting the restriction on direct sales in New York will not harm existing dealerships—instead, it opens the door for new market participants and business models. Most states allow direct sales for EVs and their dealerships have not suffered.
EVs mean 21st Century American Jobs: The companies leveraging a direct sales model—Tesla, Rivian, Lucid, Lordstown, and others—are American companies creating tens of thousands of domestic manufacturing and engineering jobs. Countries like China, and the European Union are aggressively moving to dominate the global EV market. To maintain American global automotive industry leadership, not to mention competitiveness, these outdated distribution laws much change. Many states including California, Massachusetts, Florida, Colorado, Oregon, Utah, and Wyoming have already eliminated the outdated restrictions blocking direct sales.
Recently, a study by the Sierra Club found that 74% of auto dealerships nationwide do not have a single EV on their lot for sale. Even at dealerships where EVs were available, consumers were still not being given important information about charging, battery range, and financial incentives impacting their purchase. Traditional dealerships are simply not pushing the EV sales. One reason may be because traditional franchise dealerships earn more than half of their gross profits from servicing gas-powered vehicles. Many of these maintenance requirements simply do not exist with EVs.
Transportation is the largest source of greenhouse gas emissions in New York and the entire United States. Vehicle electrification is our best chance to green the fleet. To get there, New York must eliminate market barriers and provide better choices to consumers. The proposed Direct EV Sales Bill (S.1763 Kaminsky) is a great place to start.
