Summary
- Rivian CEO RJ Scaringe criticizes dealer franchise laws in the US as being close to corruption due to state-by-state restrictions
- Many states have laws protecting car dealers, created to prevent manufacturers from competing directly with dealers
- Powerful dealer lobbies in certain states make it difficult for new brands like Tesla and Rivian to sell cars directly
- Rivian’s partnership with Volkswagen will not involve using VW’s sales network due to legal complications in the US
- Rivian CEO emphasizes the need to expand service infrastructure to keep up with growing demand and introduces the concept of a possible service partnership in Europe
Article
The Impact of Dealer Franchise Laws on Direct-to-Consumer Automakers
RJ Scaringe, CEO of Rivian, recently criticized dealer franchise laws in the United States, calling them "as close as you can get to corruption." These laws, in many states, restrict manufacturers like Rivian and Tesla from selling cars directly to consumers. While some states have more relaxed regulations, others, driven by powerful dealer lobbies, still prohibit direct sales by new automakers.
Challenges Faced by Rivian in Utilizing Volkswagen’s Sales Network
Despite a recent partnership with Volkswagen, Rivian has no intention of using their sales network due to the challenges posed by dealer franchise laws. Scaling service has been a significant issue for the direct-to-consumer model adopted by Rivian and Tesla. While leveraging Volkswagen’s service centers would be beneficial, it may not be feasible in the U.S. due to restrictions imposed by car dealers.
State Laws Protecting Car Dealerships and Limiting Competition
In states with stringent laws protecting car dealerships, dealer lobbies exert significant influence over legislation. These laws were initially designed to prevent manufacturers from competing directly with dealers. However, they are now hindering new brands like Rivian and Tesla, limiting consumer choice and competition, and protecting existing dealers’ profits. Strong relationships with local politicians ensure that laws favor dealerships.
Challenges Faced in Selling Directly to Consumers
The varied laws in different states make it challenging for automakers like Rivian to explore a mixed model with both company-owned and franchise service centers. Direct sales of vehicles to consumers can face legal challenges, making it harder to establish franchises that act as official sales and service locations. Expanding service options becomes crucial to enhancing the overall customer experience.
Prioritizing Service Infrastructure Amidst Legal Hurdles
Scaringe emphasized the importance of expanding service infrastructure for Rivian, acknowledging the short-term challenges posed by state laws. While the company’s innovative service model aims to enhance efficiency, there is a need to grow the service network. Despite the complexities, Rivian remains committed to establishing a robust service infrastructure in the U.S. and exploring partnership opportunities in Europe for service.
Long-Term Outlook for Direct-to-Consumer Automakers
In the long term, Rivian aims to navigate through the legal hurdles in the U.S. and establish a comprehensive service infrastructure to support its expanding customer base. The company’s focus on innovative service solutions and strategic partnerships reflects its commitment to overcoming challenges posed by dealer franchise laws. By prioritizing service efficiency and infrastructure growth, Rivian is positioned for sustainable growth and success in the evolving automotive industry.
Read the full article here
