New Law, New Cars, New Opportunities

SEMA News—March 2016

LEGISLATIVE AND TECHNICAL AFFAIRS

By Eric Snyder

New Law, New Cars, New Opportunities

Thanks to SEMA’s Efforts, Manufacturing Replica Vehicles Just Got a Lot Easier

“Revolutionary—that’s the easiest way to describe it,” said Lance Stander. As the CEO of Superformance, Stander knows a thing or two about replica vehicles. What has him so excited? A new law championed by SEMA and industry-friendly lawmakers in Congress that makes it easier to manufacture replica cars in the United States.

The year 2015 marked the dawn of a new era for the kit-car industry. A provision included in the highway bill now enables low-volume car manufacturers to each produce and sell up to 325 turn-key replica vehicles in the United States and a total of 5,000 worldwide under a simplified regulatory system. President Obama signed the bill into law in December, providing consumers with greater access to classically styled vehicles that resemble production vehicles manufactured at least 25 years ago, including ’30s-era hot rods and ’60s-era Cobras. The law will also create sales opportunities for companies throughout the supply chain as well as increase jobs and open new markets.

Replica Vehicle Law
Enthusiasts will soon have the option of purchasing a Factory Five ’33 Hod Rod or MK Roadster as a kit or a completed car.
 
   

“This law is a great victory for SEMA,” said SEMA President and CEO Chris Kersting. “It presents an opportunity for our member companies to grow and diversify their business models. In the process, it will create skilled-labor jobs in the auto industry, help meet consumer demand for classically styled vehicles, and ensure that our American automotive heritage is preserved.”

Replica cars have been marketed for decades as “kit cars,” where a manufacturer sells car parts, frequently assembled, and the buyer installs the engine/transmission. While states have often regulated kit cars built by hobbyists by the model year they resemble, until now the federal government viewed a manufacturer-completed replica car to be a current-model- year vehicle.

 

Questions and Answers About the Low-Volume Motor Vehicle Manufacturers Act 
 

Why is this law necessary? Until now, all motor-vehicle manufacturers were treated the same, regardless of whether a company produced five cars or 500,000. Federal law now requires the NHTSA to create a simplified regulatory program that takes into account the unique differences between a company that mass produces thousands of cars and one that hand crafts a limited number.

What is a “low-volume manufacturer”? The law states that a low-volume manufacturer is a company whose annual worldwide production (including by a parent or subsidiary of the manufacturer) is not more than 5,000 motor vehicles each year. These companies will each be able to sell up to 325 replica cars annually in the United States.

How does the law define a replica vehicle? A replica vehicle resembles the body of another motor vehicle produced at least 25 years ago. The company producing a replica must obtain a license agreement from the original manufacturer, its successor/assignee or the current owner of the replicated vehicle’s intellectual property rights. Some of the most popular vehicles that will be replicated are ’30s roadsters, ’40s Willys, ’60s Cobras and Mustangs, and ’80s DeLoreans.

What rules/regulations apply to replica car manufacturers? The company producing replica vehicles is subject to NHTSA’s equipment standards, including lighting, brake hoses, glass and tires. However, these cars are exempt from safety standards that apply to motor vehicles (roof crush, side impact, bumper standard, etc.). The exemption recognizes that it is impractical to apply current-model-year standards to vehicles designed decades ago.

When can companies start selling replica cars under the new law? NHTSA and the EPA have until December 2016 to draft regulations to implement the law. SEMA is working with these agencies to ensure that the program is implemented in a business-friendly manner when it begins in 2017. At that time, companies will be required to register with NHTSA and EPA, be subject to oversight by these agencies and file annual reports.

How will this law impact kit-car hobbyists and consumers? Hobbyists will still have the freedom to assemble their own vehicles from kits if they prefer, including modern-era cars. The law expands the market of who can purchase a replica car to include those who don’t have the time or skills to complete a kit car. In short, this law means more business opportunities for the industry and more choices for consumers.

Will I be able to title or register the car? SEMA has worked with the states to establish specific categories for titling, registering and regulating kit cars (e.g., street rods and customs, including replicas and specialty constructed vehicles), which will also apply to turn-key replicas. The laws in many states allow these vehicles to be registered and titled by the model year of the production vehicle they replicate. For more information on the laws in your state, visit the Titling & Registration page on the SEMA Action Network’s website, www.SEMAsan.com.

 

“This law will allow American and international consumers to purchase completed ‘turn-key’ cars,” Stander said. “Until now, Superformance cars have been sold exclusively as incomplete vehicles in the United States, since it is impossible for the company to certify car designs from the ’60s and ’70s to current vehicle standards.”

DeLorean
The DeLorean Motor Company plans to produce the ’80s “car of the future” using original parts.


   

Passage of this landmark law represents a tectonic shift in government policy. Small-volume manufacturing has been almost nonexistent in the United States for more than 40 years. In fact, until now, the United States had just one system for regulating automobiles, which was established in the ’60s.

The new law recognizes the inherent differences between mass-produced and custom-built cars and directs the National Highway Traffic Safety Administration (NHTSA) to lift the regulatory and paperwork burdens. As a result, small companies will be able to produce a limited number of replicas that will be subject to NHTSA equipment standards (tires, lighting, glass, etc.) but not vehicle-based standards.

Replica-car manufacturers will be permitted to install a current-model-year engine system produced by one of the large automakers and certified by the Environmental Protection Agency (EPA) or engine packages approved by the California Air Resources Board. While this action was permitted prior to the change in law, replica-car manufacturers were forced to retest the engines and submit volumes of duplicate paperwork to the EPA. The law eliminates this redundancy.

The idea for creating a simplified regulatory system for small auto manufacturers was formulated a few years back. In 2011, SEMA worked with former U.S. Rep. John Campbell (R-CA), a car dealer by trade, to introduce the Low Volume Motor Vehicle Manufacturers Act. Despite making significant progress on the bill in 2014, Congress’ shortened election-year schedule didn’t leave time to achieve final passage.

Revology Mustang
Revology’s Mustang features a replica body with all-new trim and chassis components.


   

Rep. Campbell’s retirement from Congress led SEMA staff in search of new champions for the bill. U.S. Reps. Markwayne Mullin (R-OK) and Gene Green (D-TX) shared SEMA’s passion for the cause and reintroduced the bill last June. In total, 24 members of the U.S. House of Representatives from both parties sponsored the bill, signaling strong support and creating a pathway for its inclusion in the highway bill. Support by U.S. Senators John Tester (D-MT) and Dean Heller (R-NV) was also vital in securing the Senate’s approval to include the measure.

The change in law is designed to complement the existing kit-car industry, not eliminate it. Hobbyists will still have the freedom to assemble their own vehicles if they prefer, with the engine package of their choice.

“This law gives consumers the opportunity to buy turn-key replica cars while preserving their option to build one from a kit,” said SEMA Chairman of the Board Doug Evans. “While many enjoy the process of assembling a replica vehicle, not everyone has the time and technical skills needed to complete a kit car. By permitting the production and sale of turn-key replica vehicles, the bill expands the replica market to include these individuals.”

The change in law also offers opportunities for companies to sell turn-key replica vehicles overseas.

Superformance GT 40 Mk II
Superformance’s GT 40 Mk II will be available as a turn-key replica when the law takes effect in 2017.

 
   

“There is a growing market for vintage cars around the world, and many companies recognize the potential for exporting these vehicles to foreign markets,” said Dave Smith, CEO of Factory Five Racing Inc. “Passage of this law is welcome news for consumers and the additional skilled men and women that Factory Five will be hiring to build these cars.”

For other companies, the law presents an opportunity to transition into the replica market.

“Until now, the DeLorean Motor Company’s business model has been limited to servicing the 9,000 existing vehicles in the marketplace,” said Stephen Wynne, DeLorean’s CEO. “The company can now respond to the growing demand for original and modified replica DeLorean vehicles.”

“Beyond selling more cars, the new law provides an opportunity for many SEMA members to supply parts and equipment and for other companies to help market the cars,” said Jack Chisenhall, owner of Vintage Air. “We welcome the chance to help expand the consumer base for American legacy vehicles.”

Now that the bill has been enacted, SEMA is working with NHTSA and the EPA to ensure that the accompanying regulations are written and implemented in a way that is favorable to companies looking to produce completed replica vehicles. The agencies have until December 2016 to issue the regulations, and consumers should be able to begin purchasing the cars in 2017.

For more information on the new law, visit www.sema.org/replica.

Give Congress a Piece of Your Mind!

Join Industry Leaders in Our Nation’s Capital for the 2016 SEMA Washington Rally May 11

There is a saying in Washington: “If you aren’t at the table, then you’re on the menu.” Claim your seat at the table by joining fellow SEMA members in the nation’s capital May 11, 2016, to show Congress the strength of the $36-billion automotive specialty-equipment industry.

While 2015 saw many SEMA victories on Capitol Hill, there’s still much work to be done. A few of the issues facing SEMA members during this critical election year are pursuing a pro-growth manufacturing and job-creation agenda, creating access to small-business loans and credit, identifying affordable health insurance options, countering burdensome regulations, preventing higher ethanol content in gasoline, and fighting counterfeit products.

Take advantage of this one-of-a-kind opportunity to connect face to face with your legislators on Capitol Hill and let them know what matters most to you and your business. The SEMA Washington Rally is exclusively for SEMA members.

Scheduled events include:

  • Legislative briefing session with SEMA staff.
  • One-on-one meetings with congressional legislators and their staff.
  • Exclusive Capitol Hill luncheon with special guests.
  • Private reception and dinner with high-profile lawmakers.
  • Opportunities to visit attractions in the nation’s capital.

The registration deadline is May 1, 2016. To register or for more information, visit www.sema.org/dcrally, or contact Christian Robinson by phone at 202-783-6007 x20, or via e-mail at christianr@sema.org.

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