BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1178| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1178 Author: Achadjian (R) Amended: 8/17/15 in Senate Vote: 21 SENATE TRANS. & HOUSING COMMITTEE: 11-0, 7/7/15 AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski SENATE JUDICIARY COMMITTEE: 7-0, 7/14/15 AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 80-0, 6/4/15 - See last page for vote SUBJECT: Vehicles: manufacturers and distributors SOURCE: Author DIGEST: This bill 1) authorizes the New Motor Vehicle Board (NMVB) to hear protests by an association challenging the legality of an export policy of a manufacturer, and 2) provides that an automobile manufacturer may take an adverse action against a dealer pursuant to export prohibitions only if the manufacturer has provided the dealer with the export policy in writing at least 48 hours before the vehicle is sold, and the dealer knew or should have known of the customer's intent to export. ANALYSIS: Existing law restricts an automobile manufacturer AB 1178 Page 2 from taking any adverse action against a dealer pursuant to export prohibitions unless the export prohibition policy was provided to the dealer in writing prior to the sale, and the dealer knew or reasonably should have known of the customer's intent to export the vehicle in violation of the prohibition. If the dealer causes the vehicle to be registered in California or any other state and causes to be collected any applicable sales or use tax, a rebuttable presumption is established that the dealer did not have reason to know of the customer's intent to export or resell the vehicle. This bill: 1)Adds the additional requirement that the manufacturer must have provided its export prohibition policy to the dealer in writing at least 48 hours prior to the sale. 2)Gives associations the standing to challenge the legality of a manufacturer's export prohibition policy to the NMVB. Under current law, only dealers have the standing to make such a challenge. Comments Purpose of bill. According to the author, this bill is necessary because an automobile manufacturer is ignoring a recently passed law dealing with automobile exports. That law established a rebuttable presumption that a dealer did not know or should not have known that an automobile was being exported if the dealer caused the vehicle to be registered and sales taxes were paid. Effective November 2014, the policy of this manufacturer is to punish a dealer if a specified number of its sales are exported, a clear violation of California's law, according to the author. This bill strengthens and clarifies California law. Good for the dealer, good for California. The state has a clear interest in increasing in-state vehicle sales, as this generates sales tax revenue and profits for California dealers. This may conflict with the interests of automobile manufacturers who have an interest in segmenting their markets and maximizing profits in each. Trying, and failing, to crack down. Buying luxury cars in the AB 1178 Page 3 United States and exporting them to countries like China can be lucrative, as automobile manufacturers price their cars much more expensively overseas, according to two recent articles in Autoweek "Exporting New Luxury Cars Is Lucrative, Legally Questionable," July 22, 2014, and the Financial Times "Carmakers Face Fresh China Import Threat," January 18, 2015. Some manufacturers have responded by charging auto dealers and threatening future vehicle allocations, according to the articles. The federal government has also been investigating whether such exports may be illegal, but in its first case against an alleged illegal exporter, a judge in Ohio ruled that the federal government had failed to make its case. ["U.S. Ordered to Return Assets Held in Crackdown of Luxury Cars Exported to China," New York Times, April 3, 2014.] A more recent report notes that at least a dozen other similar cases have been dropped by federal authorities. ["Prosecutors Ease Crackdown on Buyers of China-Bound Luxury Cars," New York Times, April 1, 2015.] Still no consensus. This bill still does not represent a consensus between automobile dealers and manufacturers. The manufacturers remain concerned with giving standing to the new car dealer association to bring export complaints to the NMVB. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes SUPPORT: (Verified8/18/15) California New Car Dealers Association OPPOSITION: (Verified8/18/15) Global Automakers Honda North America, Inc. ASSEMBLY FLOOR: 80-0, 6/4/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, AB 1178 Page 4 Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins Prepared by:Randy Chinn / T. & H. / (916) 651-4121 8/19/15 20:34:33 **** END ****