A bill in California that would allow automakers, commercial truck manufacturers and rental car companies to bypass dealerships and sign month-to-month electric vehicle memberships directly with consumers failed to pass this week.
The proposed law — Assembly Bill 326 — would have created a legal framework for EV memberships and allowed consumers access to EVs without financing or long-term commitments through a direct month-to-month agreement with the EV manufacturer.
The measure’s defeat on Tuesday in the California legislature is a big win and relief for franchised new-vehicle dealers in the state but a disappointment to some consumer and environmental organizations as well as EV startup Canoo, the sponsor of the bill.
Ride-hailing company Lyft and Rivian, an EV manufacturer backed by Ford, Cox Automotive, Amazon and others, both supported the bill. Proponents said the measure would expand consumer access to EVs, help the state achieve clean air goals and support its EV industry and employees working in the sector.
Canoo, based just outside of Los Angeles, plans to launch its first vehicle via month-to-month subscription to U.S. consumers in 2022. The company argued the bill is needed because the EV membership model “does not squarely fit into existing laws regulating the rental car industry or vehicle leasing.”
Canoo did not immediately respond to requests for comment Thursday. Rivian declined to comment.
In its arguments to the legislature, the California New Car Dealers Association referred to the bill as “an effort by one company to skirt the rules and could make the vehicle subscription programs already being used by consumers and offered by California’s new-car dealers illegal.”
Brian Maas, president of the association, told Automotive News the group’s members are “very pleased” with the bill’s defeat.
He said the proposed law, in its final form, would have “exempted a subset of manufacturers from all the rules applicable to all other licensed manufacturers and dealers — and without DMV oversight.”
“The bill was rushed through at the end of our legislative session in an attempt to create a new ‘membership’ structure to benefit the company pushing for its adoption,” he said. “The proposal was ill-conceived and would have been one of the most harmful automotive-related laws enacted in many years in our state.”
Hilary Haron, owner of Haron Motor Sales Inc. in Fresno, Calif., said the law would have “greatly threatened and challenged” franchised dealers.
“Exempting electric mobility manufacturers from important consumer protections — including the Vehicle Leasing Act, the Consumer Legal Remedies Act, the Car Buyer’s Bill of Rights and other state and federal laws that have been carefully crafted over the past 40-plus years that dealers follow — would have directly harmed both consumers and California’s automotive industry as a whole,” she told Automotive News. “Dealers are all for innovation, but going about it through the channel of AB 326 was very misguided.”
A similar bill in Colorado was signed into law in March and allows Rivian and other EV makers to sell directly to consumers.
The Colorado law allows manufacturers that build only EVs to own, operate or control dealerships, provided that they have no franchised dealerships in the state. Lawmakers passed the bill after negotiating a compromise with dealers in the state Senate that limited the scope to electric-only automakers.