How Rivian is fighting to break free from dealer laws
- Like Tesla, Rivian wants to own and operate his own stores.
- But many states require automakers to sell through third-party dealers.
- Rivian believes these laws will slow the adoption of electric vehicles.
In the 2000s, Tesla broke with one of the auto industry’s long-standing practices: instead of relying on third-party dealers to sell its vehicles, it would own and operate its own stores.
This strategy came with a major hurdle: Many states have laws that require automakers to work with dealerships. The list includes some of the most populous states in the United States, such as Texas and New York. Tesla has spent years lobbying to change these laws, winning in a few cases and receiving a handful of special exemptions.
Today, a new generation of electric vehicle startups are joining the fight to keep the very important sales process in-house.
James Chen, vice president of public policy at Rivian, told Insider that controlling its retail network would allow the company to have a closer relationship with its customers. With a direct sales model, Rivian can remotely monitor a vehicle’s condition, diagnose issues, and dispatch a service team to resolve them, which the company wouldn’t be able to do if it sold its vehicles. to a dealer. “We think that ultimately it’s a better experience if the consumer is able to have this direct contact with the manufacturer,” Chen said.
Customers who live in states that don’t allow automakers to own stores will still be able to purchase any of Rivian’s vehicles, Chen said. They will have the choice of picking up the vehicle in another state or having it delivered by a Rivian employee.
The National Automobile Dealers Association argues that laws requiring automobile manufacturers to sell through third parties, known as franchise laws, “level the playing field between large automakers and small local dealers.” In 2020, 94% of U.S. auto dealers had between one and five locations, according to NADA. Only 2% had more than 10.
Chen noted that companies in other industries, such as food services, accommodation and consumer electronics, are not bound by similar restrictions. In his view, the decision to offer auto dealers special protection is arbitrary.
Chen’s argument to lawmakers is that dealer franchise laws are slowing the adoption of electric vehicles, and allowing companies like Rivian to own stores won’t suddenly force local dealerships out of business. “Lawmakers are often receptive to hearing this,” Chen said.
Rivian and his peers have successfully lobbied for an exemption in Colorado and made headway in Vermont, but there are still 20 states that don’t allow direct sales from any manufacturer, and eight that have made exceptions only. for Tesla. Chen said Rivian’s political team is now focusing on regions that could be lucrative markets for Rivian’s R1T pickup truck and R1S SUV, such as the Southeast, Northeast, and Northwest.
While Chen believes the United States will continue to gradually open up to automakers bypassing dealerships, he doesn’t expect full acceptance anytime soon. “I think we’ll have this battle for a while,” he said.
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