Pub. 14 2015-2016 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 5 new jersey auto retailer W W W . N J C A R . O R G President’s MESSAGE | BY JAMES B. APPLETON NJ CARWorking To Shift The Burden of Clean Car Compliance From Auto Retailers To Automakers New Jersey is one of 16 states that have adopted the California Low Emission Vehicle (Cal LEV) program. Un- der this program, automakers must build and “deliver for sale in to the state” their pro rata share of cars and light trucks/ suvs that meet zero emissions or low emissions standards. The precise vehicle mix and quotas are set by the California Air Resources Board (CARB). Automak- ers can meet the mandate by selling their pro rata share of zero emission vehicles (full electric or fuel cell), partial zero emission vehicles (hybrids or plug-in hybrids) or super low emission vehicles (small gas engines). If a manufacturer doesn’t sell a sufficient number of these vehicles, they can buy credits from an automaker that has accumulated excess credits. Tesla, for example, sold $400 mil- lion worth of credits in the last two years to competing automakers, which were forced to buy these credits to meet their CARB mandate. Up until this point, most automakers have been able to easilymeet the CARBmandate in New Jersey and other states by using accumulated credits and by buying credits on the open market (for example, from Tesla). But, come 2018, the mandates ramp up and the ability for automakers to use accumulated credits or buy credits on the open market will wind down. That’s when the pressure to sell zero and low emission vehicles will become really intense. And, if an automaker fails to meet the CARB mandate, that automaker could be barred from selling cars in the state. It is important to note that current law in New Jersey and the 16 other Cal LEV states simply requires an automaker to wholesale cars to dealers in order to earn credits. The statute says an automaker simply must “de- liver cars for sale in to the state”. This begs the question: will manufacturers force deal- ers to take these cars without any regard to whether or not there is consumer demand and without any incentives, or will manu- facturers make it attractive for dealers and consumers to take this inventory? There is no question that government can impose mandates and manufacturers will build what the government tells them they have to build. But dealers are concerned about that happens next. Automakers can either force ZEVs and PZEVs onto your lot and wash their hands of the problem (deliver for sale in to the state), or they can come to the market with real incentives and an effective program to drive sales. There is legislation currently pending in Trenton that would establish a Low Emis- sion Vehicle Study Commission. The pur- pose of this Commission would be to study the market and offer recommendations for government programs that could help pro- mote zero and partial zero emission vehicle sales. Tax breaks, for example, and other government incentives. Infrastructure im- provements, like electric charging stations or hydrogen refueling stations. NJ CAR was successful in attaching an amendment to this legislation when it came before the Assembly Environment Comm i t t e e . The NJ CAR- ba c ked amendment replaced the current “deliver for sale in to the state” requirement, with a “retailed and registered in the state” requirement. This amendment, effectively, shifts the burden to sell a vehicle from the dealer to the manufacturer, since the manufacturer would no longer be able to earn credits simply by dumping product on the dealers. Automakers opposed this change and moved to have our amendment stripped from the bill when it went to the floor of the General Assembly. NJ CAR has successfully re-amended the bill, but the automakers have tipped their hand and their opposition to our proposed changes are a troubling signal that automakers may be content to ship cars to dealers and forget about whether they actually sell. This legislation is scheduled for a final vote on the floor of the General Assembly. NJ CAR is working with the sponsors, who recognize that no one benefits if clean cars sit on a deal- ers lot. Local businesses suffer financial loss and there is no benefit to the environment. NJ CAR will keep you posted on the status of this legislation. In the meantime, dealers should be sensitive to the fact that, under the existing CARB rules, automakers can meet their clean car mandates simply by shipping cars to dealers. Dealers and government policy makers should insist that manufacturers bring these vehicles to market with whatever incen- tives and programs are necessary to retail the cars, and not simply expect dealers to shoulder the burden of compliance.