The Collaborative Push for Direct EV Sales

Several emerging electric vehicle (EV) manufacturers, including Tesla, Rivian, Lordstown Motors, and Lucid Motors, are jointly advocating for legislative changes. Their aim is to enable direct sales to consumers in at least eight states, with further proposals anticipated this year.

Potential Impacts of New Legislation

The enactment of these laws would facilitate direct-to-consumer sales for major EV companies like Tesla, as well as newer entrants such as Lucid and Rivian, who are still preparing to launch their vehicles. However, Tesla’s involvement could potentially diminish its exclusive right to direct sales in certain states.

A Different Business Model

Tesla and a growing number of new EV companies operate under a distinct business model compared to traditional automakers like GM, Ford, and Stellantis. They utilize branded stores for vehicle sales, mirroring Apple’s approach, and eschew the traditional franchised dealership system.

This direct sales model has sparked opposition from auto dealers, who benefit from established regulations in all 50 states. These regulations prevent manufacturers with existing franchisees from establishing their own dealerships to compete directly.

Tesla's Advocacy and Current Landscape

Tesla and its allies contend that, lacking franchise dealers, they should be permitted to sell directly to customers. Thad Kurowski, senior policy manager at Tesla, articulated this position during testimony before the Washington House’s Consumer Protection and Business Committee. Washington is among the states currently evaluating such legislation, where Tesla operates six retail locations.

Similar legislative efforts are underway in Connecticut, Nebraska, Georgia, New York, Wisconsin, Pennsylvania, and Nevada. Some states entirely prohibit direct sales from EV manufacturers, while others permit only Tesla, often with limitations on the number of retail stores.

Unusual Alliance Among Competitors

This represents a rare instance of collaboration among EV manufacturers, who typically compete with each other and with established automakers for market share. Despite this cooperation, past relations haven’t always been harmonious; Tesla filed a lawsuit against Rivian last July, alleging trade secret theft and talent poaching.

Rivian countered, asserting that two of the three claims were attempts to damage its reputation.

Tesla's History with Direct Sales Regulations

Tesla has a history of navigating legislative challenges regarding direct sales. At least a dozen states, including Arizona, Colorado, and Utah, have reversed bans preventing Tesla from direct sales through new laws or court rulings.

The Michigan Battleground

Michigan, a hub for major automakers GM and Ford, has been a significant point of contention. A 2014 bill, supported by the Michigan Automobile Dealers Association, prohibited Tesla from direct sales within the state.

Tesla subsequently sued Michigan after its dealership license application was denied. A bill considered in December 2023 would have allowed all direct sales except for Tesla, with restrictions on where sales and title transfers could occur. This exception was ultimately removed, potentially jeopardizing Tesla’s limited progress in the state, but the legislation ultimately failed.

Lucid Leads the Charge and Coalition Efforts

Daniel Witt, a former Tesla employee now leading public policy at Lucid, reports that Lucid is spearheading efforts in several states. He emphasized that the bills are a result of collaborative work from the EV company coalition, grassroots lobbying by EV owners and enthusiasts, and support from consumer groups.

The legislation also receives backing from environmental and clean energy advocates, who argue that increased consumer choice and accessibility are crucial for transitioning away from internal combustion engine vehicles.

A Unified Approach

“Whether it’s New York, Washington, or Connecticut, we’re all rowing in the same direction,” Witt stated, suggesting a consistent strategy across different legislative arenas.

Dealer Association Concerns

The Washington State Auto Dealers Association expressed support for the transition to zero-emission vehicles and a willingness to sell them through franchised dealerships. However, they characterized the direct sale bill as a “battle of Main Street vs. Wall Street.”

They argue that EV manufacturers misrepresent the costs associated with establishing their own stores, suggesting that profits would be diverted to out-of-state investors rather than reinvested in local communities.

Funding and Potential Conflicts

The association highlighted Rivian’s $500 million investment from Ford and its overall valuation of $27.6 billion, citing backers like Amazon, T. Rowe Price, Fidelity, Coatue, Cox Automotive, and D1 Capital Partners. They questioned whether Ford might abandon its dealer network to benefit from Rivian’s ownership structure.

It is important to note that neither Ford nor GM has announced plans to abandon their existing dealer networks.

Legislative Hurdles Remain

EV manufacturers face a challenging legislative path. Bills must pass through committee reviews and secure majority votes in both the House and Senate before reaching the governor for final approval.

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