For over 50 years, there has been a franchise law in Mississippi. One of the chief purposes of the law has been to build a network of independent car dealerships in our state that would provide sales and service of automobiles to Mississippians. The law has been good for Mississippi and its consumers. We have dealerships in cities (big and small) from border to border, competing for business and meeting the essential automotive needs of our citizens. These dealerships provide good-paying jobs, produce millions of sales taxes, and voluntarily pay millions of dollars to support their communities.

A key component of the franchise law requires a dealer to have a bona fide contract with the manufacturer to receive a dealer’s license from the Mississippi Motor Vehicle Commission. This keeps manufacturers from opening corporate dealerships and creating unfair competition.

However, this part of the franchise law was destroyed in a few months when Tesla Motors created Tesla Mississippi, LLC and contracted with themselves to receive manufacturer’s and dealer’s licenses from the MMVC. Because of this precedent, Mississippi is the only state where a manufacturer can create an LLC to receive a dealer’s license.
Legislation is needed to clarify and repair the franchise law. MADA had legislation introduced last year, but the bill died on the final day of the 2021 session.

HB 401, sponsored by Chairman Trey Lamar, prevents a motor vehicle manufacturer from owning or controlling a dealership. There are three exceptions:

1. Temporary ownership during a transition from one licensed motor vehicle dealer to another
2. Temporary partnership with an independent person who has made a significant, bona fide, unencumbered initial investment in the dealership that is subject to loss
3. Tesla is allowed to keep their dealership but is limited to further expansion by clarifying the law and closing the loophole.

The legislation passed the House on a vote of 105–9.

Opponents of the bill continue to make false statements about the legislation, but legislators have learned the truth:

• HB 401 does not block any car manufacturer from selling vehicles online.
• HB 401 does not block electric vehicle manufacturers from opening service centers.
• HB 401 does not block Mississippians from ordering the vehicle of their choice from any auto manufacturer.
• HB 401 creates one set of rules for electric vehicle companies and the manufacturers and franchised dealerships in Mississippi.

Status of the Legislation

HB 401 has passed the Senate Finance Committee and awaits a vote of the full Senate. MADA is working to pass the legislation with no amendments and send it to the Governor. Unless the Governor vetoes HB 401, it would become law on July 1, 2023.

To learn more about this important issue watch the video below.