What happened to free enterprise?
Tesla has been an industry disruptor in several ways, including the way it sells cars. Instead of the traditional dealership franchise, Tesla sells directly to customers. This model certainly works but many states have a problem with it because it completely eliminates private dealers. Auto dealership associations also happen to be very powerful and have a tendency to lobby automakers. In Michigan, for example, Tesla was only recently legally allowed to own its service centers through a subsidiary following a year-long battle. And now those Michigan dealerships have a new target: Rivian.
According to Bloomberg, those auto dealers are now attempting to block Rivian and other new EV automakers such as Lucid Motors from directly selling vehicles to customers and servicing them. How so?
Just last week, a bill was introduced in the Michigan legislature that, if passed, would block any EV automaker, aside from Tesla, from selling its vehicles without a franchised dealer and service center. A vote on the bill could take place as early as this week.
"This is a bullseye on Rivian and Lucid and any EV manufacturer that would come in after Tesla does," said James Chen, Rivian's vice president of public policy. Those auto dealers, according to him are doing nothing more than "protecting a monopoly through legislation."
However, the Michigan Automobile Dealers Association, which represents around 600 dealerships, disagrees. The Tesla settlement, according to the organization's executive vice president, "was based on a clear set of specific facts for a specific time." The dealer's association is in no mood to make any more exceptions for anyone else.
So far, Rivian has no plans to introduce a dealership franchise model. The Rivian R1T pickup truck and R1S SUV are set to go on sale next summer, though perhaps not in Michigan. California and Illinois, however, don't have such restrictive dealership franchise laws, which makes sense given the popularity of EVs in the Sunshine State. Rivian's production facility is located in Illinois, but it also has employees in California and, ironically enough, Michigan. But Rivian appears to be ready to fight the lobbying efforts of Michigan's dealer association.
Like Tesla, it'll probably opt for the free enterprise argument, but it's not a given that this approach will work. "Michigan is one of our homes," Chen added. "So we don't want one of our three home states basically locking us out."