Rivian seeks direct sales beyond Colorado

A battle over automakers' ability to sell electric vehicles directly to consumers is brewing in Colorado — and the EV startup that is backing that effort has its sights set on direct sales in many more states.

That startup, Rivian, is lobbying to open up Colorado's dealer franchise law as it prepares to start production of electric pickups and SUVs this year. Lawmakers in that state could vote as soon as this week on a controversial bill that would allow any automaker — including those with existing franchised dealerships — to sell their EVs directly to customers.

An amendment added to the bill Friday, Feb. 21, designed to prevent traditional automakers from opening up next door to their franchised dealers did little to quell retailers' concerns about what they say are the potential risks should the bill become law.

"We're not enamored with the amendment," said Tim Jackson, president of the Colorado Automobile Dealers Association. "You can't put lipstick on a pig. It's still a pig."

Colorado dealers were expected to lobby some state senators in what Jackson described as an effort to swing a few more votes against the bill, which is backed by a bipartisan group of lawmakers and Rivian.

Rivian's push for direct sales doesn't end in Colorado. The automaker is in favor of a similar bill in Washington state, though that measure is presumed dead this legislative term. Rivian's lobbyist told Washington state legislators in a public hearing Feb. 4 that the startup has received a dealer license in Arizona and is seeking licenses in Illinois, Massachusetts, California and Florida. Rivian's top lobbyist told Automotive News that he believes the company already has the leeway to sell directly in those states.

It's a familiar playbook, one that EV maker Tesla wrote as it rolled out its own direct-sales model. And it has outraged dealers, especially in Colorado, where they say the legislation goes farther than other efforts.

Automakers are preparing to launch more than 100 EVs over the next several years. Several automakers told Automotive News that they don't intend to bypass their new-vehicle dealership partners, even if the bill is adopted.

Dealers "are the backbone of the company. We don't have a plan anywhere that doesn't have the dealers as our interface with the customer," said Mark LaNeve, vice president of U.S. marketing, sales and service for Ford Motor Co. Ford invested $500 million in Rivian last year.

The Alliance for Automotive Innovation, the newly formed trade group that represents automakers, is neutral on the Colorado bill, according to bill cosponsor Sen. Chris Hansen, a Democrat from Denver, and the Colorado dealers association. An alliance spokesman last week said the group has not taken a formal position on the bill.

The amendment to the Colorado bill would prevent traditional automakers from violating their dealer franchise agreements, both existing and future. Backers of the amendment positioned it as a measure meant to alleviate dealers' concern about competing directly with their automaker partners.

But some dealers say the legislation still creates a legal avenue for automakers to later change their minds — adding more risk to a franchise model whose future already is uncertain.

"We believe they do want to work with their dealers," said Jackson, whose members sent a flurry of letters to state senators prior to action on the bill last week. "But we think it would be tempting to go around that dealer body to sell direct if they thought it would be an advantage."

Rivian says direct sales are essential to its business model because it won't mass-produce millions of EVs for store lots. Instead, its vehicles will be made to order based on customer specifications, James Chen, Rivian's vice president of public policy, said in testimony in Washington state on Feb. 4.

"This is not about Rivian trying to eliminate franchised dealerships," said Chen, who had a similar role at Tesla.

Ford, General Motors and Fiat Chrysler Automobiles "make literally millions of vehicles a year. They're designed to keep the factories running; they supply dealer lots; they put in huge inventory [of] vehicles," Chen testified.

He added that Rivian's Normal, Ill., factory has a historic capacity of churning out 250,000 vehicles annually.

States such as Colorado and Washington are either ambiguous about or prohibitive of direct sales, Chen said.

That makes such lobbying necessary — companies such as Rivian are hesitant to invest in property leases and equipment to open a store if it's not certain they'll be allowed to do so, he said.

Rivian is considering whether and where additional legislation might be needed.

"Our bill will not interfere with their contracts between [dealers] and their manufacturers," Chen said. "This is about opening up Colorado to additional investment and allowing a new entrant with an exciting new technology to be able to invest in Colorado."

Ford and Rivian will co-develop the first EV for Ford's Lincoln brand. But that vehicle would not be sold in Rivian stores because it is being made for Ford Motor, Chen testified in Washington state.

Still, franchise law changes could open the door to direct sales by traditional automakers, putting at risk millions of dollars in investment that dealers spend on their stores, said Len Bellavia, founding partner of Bellavia Blatt PC, a law firm that represents franchised dealers. Bellavia said he is not involved with any of the legislation.

Scott West, general manager of Prestige Imports, which sells Porsche and Audi vehicles in Lakewood, Colo., testified last week that he is finalizing a nearly $18 million Porsche dealership that incorporates fast-charging infrastructure for current and future electrified vehicles. He told Automotive News via email that the project should be complete in 2022.

It's "not realistic that any of our manufacturers would even dream of doing this, but passage of this bill takes that investment — emotional, monetary investment — and pits us against the very manufacturers and allows them the opportunity to compete directly against us," West testified.

The Colorado dealers association says Rivian's effort is premature, since the company has not applied for a dealer license and been denied.

Chen told Colorado lawmakers Rivian is scouting for sites for factory stores and would apply for a license once locations are identified. He said Rivian believes the bill is necessary to clarify the company's ability to sell directly to consumers.

The Colorado dealers association, however, contends Rivian already can. Colorado's dealer franchise law contains an exception for automakers to operate a dealership "if the manufacturer has no other dealers of the same line-make in this state," according to the statute.

Dealer associations elsewhere also are keeping an eye on legislation in their states.

A Washington bill that would have allowed direct sales by automakers that produce only all-electric vehicles is presumed dead after failing to advance out of a committee by this month, according to the state legislature and Vicki Fabre, executive vice president of the Washington State Auto Dealers Association.

In Pennsylvania, state Rep. John Lawrence wrote in a memo in August 2019 that a direct-sales exception granted for Tesla in 2014 needs to be adjusted as other companies enter the market. He introduced House Bill 1901 in October 2019, and it remains in committee. Chen said Rivian has been involved in legislation in Pennsylvania.

"My bill opens that up to allow for the sale of more electric vehicles in the commonwealth. Certainly, we want to see more folks buying electric cars, and we do not want bureaucracy standing in the way," Lawrence wrote in an email to Automotive News.

John Devlin, president of the Pennsylvania Automotive Association dealer group, said it opposes Rivian trying to sell EVs directly to consumers in its state, largely because of Ford's investment in the company.

Ted Smith, who leads Florida's state dealer association, said he has heard Rivian is considering trying to enter the state.

Rivian was granted a dealer license in Arizona on Jan. 23, a spokesman for the Arizona Department of Transportation said. Rivian can sell new, used or wholesale vehicles just as other brand dealers can, the spokesman said.

Audrey LaForest, Michael Martinez, Hannah Lutz, Larry P. Vellequette, Urvaksh Karkaria and Tom Worobec contributed to this report.