![Illinois Auto Dealers Sue State Over Rivian’s Direct-Sales Model [UPDATED]](https://www.thetruthaboutcars.com/wp-content/uploads/2021/03/rivian-suv-610x407.jpg)
With production of its R1T pickup scheduled to commence later this year, upstart EV maker Rivian is aiming to get its products into as many states as possible, even if it means challenging dealer franchise laws. Following the R1T’s debut, the R1S three-row SUV will arrive to bolster Rivian’s emissions-free game.
In Colorado, where a bill seeking to allow direct sales via OEM-owned stores cleared a Senate committee last week, Rivian hopes to secure a victory — then replicate it in other protectionist states.
Senate Bill 167 wouldn’t just help Rivian. The legislation would allow any automaker, even those with franchised dealers, to sell electric vehicles directly to consumers. The only protection in the bill is an amendment, added last Friday, that would forbid an automaker from opening a store next door to an existing dealership.
Go figure, the Colorado Automobile Dealers Association isn’t hot on the idea.
“We’re not enamored with the amendment,” Tim Jackson, president of the CADA, told Automotive News. “You can’t put lipstick on a pig. It’s still a pig.”
As reported by the Colorado Sun, the state’s dealer franchise law is fairly hazy in its wording; Jackson feels that an automaker like Rivian could already be within its rights to open a dealer. The bill’s backer, Senator Chris Hansen (D-Denver) agrees on the ambiguity, but feels the legislation is necessary to clear up any mystery and give EV makers a new avenue to reach customers.
The bill has the support of Gov. Jared Polis.
Earlier this month, a Rivian lobbyist said the Michigan-based automaker, which owns a former Mitsubishi assembly plant in Normal, Illinois, has received a dealer license in Arizona, and is pushing for entry into California, Illinois, Massachusetts, and Florida. Efforts to legalize a direct-sales model in Washington hit a legislative roadblock, however, as a bill seeking to allow such a model is now dead in the water for the current term.
In response to the Colorado bill, numerous automakers pledged support for their existing dealer networks. Officials from Ford, General Motors, Toyota, Mitsubishi, and Audi have all issued statements backing the franchise model.
[Image: Rivian]
They could go the route of Amazon’s vehicle sales, or Costco, Carvana, etc. These large dealer networks are like Sears in 1996 — dead man walking.
Carvana is a used car dealer that offers online transaction and home delivery service as its main party trick. It otherwise operates as any other dealer.
Costco doesn’t sell cars, they contract with franchise dealers who agree to certain pricing and process guidelines. While they could do the same with OEM-operated dealerships, it would require the industry maintain the status quo of price competition via vehicle discounts and incentives.
Large dealer auto groups are putting small single-point dealers out of business. Companies like AutoNation, Sonic, Fletcher Jones, etc. aren’t going anywhere.
Dealership profits are made in the service department, and in F&I. I can’t imagine any traditional OEM is excited to get into the retail end of the business, knowing they wouldn’t make any more money on the vehicle sales than they already do selling inventory to dealers and then charging those dealers flooring fees. It doesn’t make sense to spend the overhead on a dealership- brick/mortar, lot, staff, equipment, etc.- to make some money on transmission rebuilds.
” It otherwise operates as any other dealer.”
Not true…They tend to charge more than typical dealers.
I wonder where I have to buy my RT1 when they become available for sale to the public. I was hoping for TX or NM but with this legislation pending in CO who knows what other states will do. Existing dealerships do no like direct sales.
Why only electric vehicles?
Yes…I agree.
If the Uber example of “influencing” politicians is any example, the applied pressure of Tesla and Rivian will be too much to bear.
Ahh the infamous vaporware R1T, the phantom vehicle that is about to be delayed for another year. And another year after that. They won’t need a dealer network for a vehicle that will never be built.
“vaporware” is a way-overused term.
What is the source of your cynicism? Did you read articles that said the vehicle would already be produced by Q1 2020? Everything I’ve seen shows they are on schedule and producing: several test mules running with F-150 bodywork, purchase of factory location, approved licensing to retail through the US, goal for production to begin in 2020 (it’s only February)…
like I alluded to, people fling “vaporware” at anything that isn’t out yet. It’s supposed to mean a product which repeatedly misses release dates over a long period of time. e.g. Duke Nukem Forever.
I meant to reply to Imagefont.
We don’t need a new “Duke Nukem”…The original was peak video game. No shooter can touch it.
Now, by “original”, do you mean “Duke Nukem 3D” from 1996, or “Duke Nukem” from 1991?
https://en.wikipedia.org/wiki/Duke_Nukem_(video_game)
Ah yes…Forgot the side scrollers (and may as well lunk Commander Keen in there). I mean the 1996 game of course. Now excuse me…It’s time to kick A$$ and chew bublegum…and I’m aaaaalll out of bubblegum!
Hail to the king, baby!
I have no idea what you are talking about… like, Nada.
Google is your friend…though I’d recommend installing DOSBox and just playing it. Duke Nukem is a video game, one of the great early first person shooters known for being way ahead of it’s time with respect to how much the character could interact with the environment…many times in an R Rated manner. To a generation of Gamers it represents the high water mark for the era.
John *Nada* (Roddy Piper) in “They Live” talked about bubblegum and ass-kicking in 1988. Which is before 1991 or 1996. One source:
https://knowyourmeme.com/memes/im-here-to-kick-ass-and-chew-bubblegum
Which is why it’s potentially funny when I say “…Nada” at the end of my comment – with a capital N – see it’s a person’s name.
And really could’ve taken off in a thread about dealer associations – because NADA is the National Automobile Dealers Association. See?
But it’s no fun when you have to explain it.
What I can’t figure out is why the Franchised Dealer Model needs laws enshrining it as the only way to sell cars. Franchise agreements can be (and have) been written to prohibit direct-sales from poaching on the territory of existing franchisees. (Restaurant chains with a mix of corporate stores and franchises do this all the time.)
A law *requiring* sales to only be done through franchises makes no logical sense, unless, of course, you are an auto dealers association.
“A law *requiring* sales to only be done through franchises makes no logical sense, unless, of course, you are an auto dealers association.”
Bingo. it’s just the result of good ol’ boy backroom politics.
way it was told to me is that back in the day, in many communities the owners of car dealerships were the wealthiest people in town. they either got into local politics and worked their way up to state legislatures, or they were buddies with someone who did and was only too happy to enshrine their business model into law.
On the other hand, knowing that you have a place to go with your problems and grievances, staffed by people who probably live in your community (and are therefore at least somewhat subject to public shaming if they shaft customers) has value and provides some protection for the consumer.
For whatever reason, automotive sellers and servicers are unusually shady. If you make cars ‘mail order’, there’s even less incentive to treat customers fairly, because a remote, centralized management is better able to isolate itself from upset consumers. If small independent businesses of yore had mistreated workers the way that today’s big chains do, they would have been quickly replaced by more-honest brokers.
Again, why need this be mandated in the law? If a car manufacturer direct-sells and routinely shafts consumers, then they will eventually fail all by their lonesome.
In any case, it’d take real effort for an OEM-run sales process to shaft consumers even more than these upstanding members of the community already do.
Where is Buickman (I think he is the big dealer fan on here)? You see, they are really looking out for you with the 1000 dollar “gold kit” and 1400 dolla “fabric protection”. And those document fees are required by the state…nothing they can do about it.
And let me tell ya all the value you’re getting for that $5,000 market adjustment on this here Veloster.
Come on Ruggles, you know you want to jump in.
That’s him…not Buickman. My apologies to Buickman.
Whatever happened to Dave Ruggles? He’s still listed on Linked-In. OTOH, when I quit working I removed my name and listing.
“We’re not enamored with the amendment,” Tim Jackson, president of the CADA, told Automotive News. “You can’t put lipstick on a pig. It’s still a pig.”
Now imagine him saying this with crudely applied lipstick. In my opinion, dealers are the pigs wearing lipstick.