On Feb. 3, an influential lobbying group representing New York auto dealers held a fundraiser for Gov. Kathy Hochul, according to campaign finance records. The event was well-timed.
The next day, leadership of the state Automobile Dealers Association had a key meeting scheduled with Hochul’s government staff concerning a bill permitting electric vehicle manufacturers to sell their products directly to state consumers. It is an idea traditional auto dealers cast as an existential threat to their businesses.
But the meeting did not go well, according to a letter that auto dealers later would write to Hochul: Her staff repeatedly referred to them as “dinosaurs,” the dealers said.
Yet when the legislative session wrapped up in June, the lobbying group had again succeeded in killing the bill – an outcome alarming environmental groups, who say the State Legislature’s protection of a powerful industry causes New York to lag in a key area of fighting climate change.
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In 2019, New York passed the country’s most ambitious climate goal law, and last year, Hochul signed legislation to phase out the sale of new gas-powered vehicles by 2035. But the state has also ranked in the middle-of-the-pack nationally in electric vehicle adoption per capita, and Hochul has not publicly embraced the idea of direct sales of electric vehicles.
The state Climate Action Council, charged with crafting a plan for hitting climate targets, will release a final report Dec. 19 – and a recommendation for direct sales is expected to be included, said Anne Reynolds, the executive director of the Alliance for Clean Energy New York and a member of the Council.
“I certainly hope that means the governor will then be super proactive in making it happen,” Reynolds said.
Unlike some aspects of the Council’s plan, however, this one will require a heavy lift with the State Legislature.
Tesla, Rivian and Lucid are the three main electric vehicle manufacturers pushing for a change in state law. It’s currently legal for New Yorkers to buy such cars online. But other, typical parts of the car-buying process are barred.
Jim Chen, the chief lobbyist for Rivian Automotive, is a Buffalo native. For a person from Chen’s hometown looking to test drive a Rivian, he said, traveling to Illinois is the closest legal option.
“Anyone from Buffalo who would like to make a purchase would essentially have to travel out of state,” Chen said. “You can’t test drive one in New York, you can’t go see the vehicles in New York. You can’t talk to someone face to face with questions.”
Absent traveling out of state, buying a Rivian in New York has to be “done on faith – and that’s not a great customer experience,” he said. And when selling a new, unfamiliar technology, customer experience is essential, he said.
To test drive a Tesla, it is only somewhat easier. A Buffalo resident can travel six hours to Mount Kisco in Westchester County – Tesla’s farthest-north location in New York where the cars can be bought. It’s also possible to do a Tesla “demonstration drive” in the Town of Henrietta outside Rochester, though the company can’t discuss cost or other aspects of a possible purchase at that location.
‘Recognition and access’
On the federal level, the National Automobile Dealers Association is one of the country’s most powerful lobbying groups. In Albany, the nearly century-old New York State Automobile Dealers Association also wields influence.
Local car dealerships are major job sources in rural areas. They have relationships with local politicians, support youth sports leagues and community organizations.
“It’s not a popular industry, but they’re pretty sophisticated – and very engaged in communities,” said Richard Schrader, Northeast Director of Policy at the Natural Resources Defense Council. “And they have a very well-organized machine statewide, with a big PAC.”
On its website, the state Auto Dealers Association says its well-funded political action committee has “gotten us recognition from and access to legislators and regulators in New York.” In the recent past, the group has met with Hochul, Attorney General Letitia James, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie, all Democrats.
Tesla has its own influential advocates in Albany, including Rick Ostroff, a veteran lobbyist who hosted three 2022 campaign fundraisers for Hochul. And top environmental groups have joined the company’s cause.
Under the traditional auto sales model, there are manufacturers of new cars – such as Ford, GM or Toyota – and there are sellers, the franchise auto dealerships. State laws, including in New York, keep those roles distinct so that franchises, which face significant upfront costs, don’t face unexpected competition with their own manufacturers.
But newer entrants like Tesla, which make exclusively electric cars, are seeking to skip the dealership model. They will sell new vehicles themselves, and unlike the traditional auto industry, have no franchises.
In 2009, Tesla opened its first store in New York, sparking litigation by the state Auto Dealers Association, which lost. By 2014, Tesla had five locations in the New York City area. That year, auto dealers’ allies in the Legislature pushed for a law barring all direct sales of electric vehicles. Tesla acceded to a compromise allowing the five existing locations, but nothing further. Newer entrants like Rivian are barred from setting up showrooms entirely.
Environmentalists cite data showing electric adoption is much higher in direct sales states, including in some politically redder than New York. According to a January article in The Atlantic, Floridians from 2019 to mid-2021 bought more than 60% more new electric vehicles, even though New York’s government provides consumers a significant rebate, while Florida’s does not.
Franchise auto dealers say they are committed to transitioning to emission-free vehicles. But Reynolds, of the Alliance for Clean Energy, argues that because of profit motive, many franchise dealers are, in fact, not pushing the electric vehicles made by their own manufacturers.
Reynolds notes franchise dealers make a substantial amount of their profit servicing vehicles and through parts sales, an assertion that has been reflected in data from the National Automobile Dealers Association. There are about 20 parts in an electric car engine – compared to 200 in a combustion engine – so electrics need less repair and maintenance, she says.
In 2021, an Alliance for Clean Energy survey found only 16% of state dealers had an electric vehicle available for test-driving, and only 30% had one for sale. In 2020, 1,900 electric cars were sold by New York’s 848 franchised dealerships. The five Tesla locations sold more than 10,000, according to state data cited by Chen.
Franchise dealers said in 2021 that supply chain issues, as well as lack of consumer demand, contributed to the low figures for electric vehicle sales in New York. In 2022, consumer demand did increase substantially as gas prices shot to $5-a-gallon nationally over the summer, and sales also increased.
The bill before the Legislature would allow zero-emission car manufacturers, who do not have any franchises, to directly sell to customers. The bill faces headwinds in the Assembly, where Democrat William Magnarelli, chair of the Transportation Committee, is blocking it.
He did hold a hearing in November 2021, and representing Tesla was Albert Gore III, the son of the former vice president and noted climate change activist. Gore argued more competition would lead to greater electric vehicle sales for everyone, including franchise dealers. He added that in Florida, franchise dealerships had flourished even as Tesla had opened 17 locations – and cited data indicating dealer job growth nationally was actually 20% higher in states allowing direct sales.
Auto dealer representatives testified that the new breed of companies offered niche products, too pricey for New Yorkers to broadly adopt. They also argued that inviting more direct competition from those companies would financially decimate franchise dealerships.
The state Automobile Dealers Association stressed that Tesla is owned by Elon Musk, while Rivian is 20% owned by Amazon, the retail giant founded by Jeff Bezos. Musk and Bezos are the world’s two richest men.
“Look at the companies pushing for this change in state law,” testified Caitlin Anderson, who at the time was an attorney and lobbyist at Bond Schoeneck & King, representing the state auto dealers. “What do the two of them have in common? Billionaire control … The direct sales push is an attempt by billionaires to obtain an unnecessary exemption to the law, so that they may operate by their own set of rules.”
To increase sales, she argued, New York must instead focus on expanding electric vehicle infrastructure, namely charging stations.
Further complicating the picture is that New York Democrats are being pushed in one direction by one ally – environmental groups – and the opposite by another – organized labor. The United Auto Workers and United Service Workers Union represent employees at franchise auto dealers in New York, and have come out strongly against the bill – and its corporate backers.
Tesla has spent heavily “trying to stop organizing drives,” testified Connor Shaw, political director of United Service Workers. “One of the other companies is largely owned by Jeff Bezos – who is maybe the most anti-labor person in the whole country.”
The state Auto Dealers wrote this year, in a memo to its members, that New York legislators are in the “uncomfortable position of choosing between labor and environmentalists. That is good for us and bad for the supporters of direct sales.”
Neither the state Auto Dealers Association nor Tesla responded to requests for comment last week. Chen said Rivian was “not anti-union, per se” and that if its workers “decide to unionize, that is the workers’ decision.” The company also cites current policies giving employees competitive wages and generous benefits.
‘A threatening note of finality’
A year ago, the Auto Dealers Association believed Hochul was strongly considering embracing direct sales in her inaugural State of the State address.
A few days beforehand, Hochul’s office was inundated with emails from auto dealers around New York, and the governor did not include the proposal. Soon after the Jan. 5 speech, Hochul’s office began receiving messages from Tesla owners, asking her not to let “politics and protectionism for powerful interest groups stand in the way of progress.”
On Feb. 3, the state Auto Dealers Association held a Hochul campaign fundraiser, but two meetings over the next week then apparently went awry.
“We have come away from those meetings with a clear message from your staff that there does not appear to be much, if any, room for discussion,” wrote the president of the state Auto Dealers Association, Robert Vancavage, in a Feb. 14 letter to Hochul also signed many other leading state industry officials. “At the conclusion of the first meeting, where our dealer members were deemed ‘the only obstacle’ and where retailers were described at least a dozen times as ‘dinosaurs,’ we were told that we needed to decide how many non-franchise stores can we live with.”
The second meeting “concluded with your lead staff member, in a threatening note of finality, stating that we ‘have been provided our opportunity for dialogue.’ ” The dealer leaders requested a meeting directly with Hochul.
In a mid-April speech at the New York International Auto Show, Hochul told the audience that the auto industry “needs to be reckoned with and dealt with and embraced.” The direct sales bill did not gain more momentum last session.
But the Climate Action Council, which includes many top officials from Hochul’s administration, is expected to include direct sales in its impending recommendations. Julie Tighe, president of the League of Conservation Voters, notes that some elements of the plan will be costly, but direct sales is a “zero-cost way for the state of New York to meet its climate goals.”
Hochul’s office declined to say whether the governor would embrace the direct sales in her State of the State or budget plans in January, likely crucial for overcoming opposition in the Legislature.
“We are committed to meeting our ambitious clean energy goals and making electric vehicles more accessible to New Yorkers,” said Hochul spokeswoman Julie Wood. “The referenced letter is a complete mischaracterization of our collaborative, good faith efforts with all parties to find solutions toward these goals.”
Democratic Assemblywoman Patricia Fahy, the lead sponsor of the direct-sales bill in that chamber, said some of her colleagues were put off last session by the notion of passing a bill helping Musk, citing his anti-labor record. Since then, Democrats’ dislike of Musk has only grown, fueled by his successful purchase of Twitter and surrounding controversies.
Still, environmental advocates hope legislators can look past those personal feelings toward the billionaire.
“We’re not doing this for Musk,” Schrader said. “It’s a reality that people don’t like this guy, and he’s a very big public emblem. But he shouldn’t be more important than climate change.”
Clarification: This article has been updated to clarify that an electric vehicle engine has 20 parts. An earlier version was not clear.