Electric automaker Rivian filed suit alleging that Ohio’s franchise laws block competition. Should Rivian be allowed to sell directly to consumers?
Direct-to-consumer sales aren’t commonplace in America. Car dealers are required by automakers to create deals with consumers, and that’s the way its been for decades. In recent years, electric vehicle manufacturers have challenged this status quo to sell their vehicles without an expensive dealership and all the personnel that goes along with them. Rivian is the latest to challenge the direct-sales ban in Ohio. A win for Rivian could open the doors for other automakers.
No sales, but other operations in Ohio
Currently, Rivan, Tesla, Lucid, and Scout cannot sell vehicles directly to consumers in the state of Ohio. There’s a ban on this type of sales, which requires these automakers to sell via dealerships if they want to sell cars. The law allows them to service, rent, and deliver cars to customers in Ohio, but not sell them using a direct-sales model. These other operations aren’t enough for these automakers to continue to operate in Ohio, and most don’t want to build expensive dealerships, especially during a time in which electric vehicle sales have slowed.
Strange state laws and practices cause strife
Rivian cannot sell vehicles in the state of Ohio because they don’t have a physical dealership. That said, they can sell them in neighboring states and deliver vehicles to customers in Ohio, which might seem strange, but this is how the laws are written. These laws are meant to protect dealerships and force automakers to set up permanent structures within the state. Still, a customer could visit a neighboring state and have the Rivian vehicle shipped to their home in Ohio, which seems a bit strange.
Is the law nonsensical?
The lawsuit has been filed against the Ohio Bureau of Motor Vehicles, and it calls the current limitations nonsensical. You can see Rivan’s point considering it’s allowed to operate nearly every other part of its operation, except to sell vehicles in the state. The direct-sales model is simply something that Ohio hasn’t bent on or chosen to embrace yet. The court filing spells out all of the ways that Rivian is capable of operating within the state’s borders, but they aren’t allowed to use their sales model to sell vehicles to consumers, which might seem a bit odd and antiquated to some.
Should Rivian build a dealership in Ohio?
Wouldn’t it be much easier for Rivian to simply build dealerships in Ohio and sell vehicles at these locations? That would certainly solve the sales problem, allowing the company to offer EVs to consumers throughout the state. One of the biggest challenges facing electric vehicle manufacturers is competing with legacy automakers. Most brands, such as Ford, Nissan, Toyota, Honda, and the family of brands from GM and Stellantis, offer a wide array of vehicles. This means these automakers have a vehicle to fit nearly every need, including electric models. That’s not the case for Rivian, Tesla, Lucid, and Scout.
What if EV automakers teamed up?
A unique option that might work would be for the EV automakers to team up and put all brands at one dealership. This would allow consumers searching for an electric vehicle to have choices from these automakers all in one location. Unfortunately, the EV brands are generally opposed to each other and in direct competition. Still, if you could go to one dealership to shop for Tesla, Rivian, Lucid, and Scout vehicles, it could be a much more convenient experience than without this type of dealership.
Direct sales is the affordable option
As you would expect, the Rivian direct-sales model would be the most affordable way to sell vehicles in Ohio, hence the lawsuit. The automaker is up against more than just the Ohio Bureau of Motor Vehicles; the National Automobile Dealers Association (NADA) lobbies hard every year to keep brands from using a direct-sales model. This makes perfect sense since this organization represents dealers across the country, and the direct-sales method cuts out these dealers altogether.
“Rivian believes that consumers should be able to choose the vehicles they purchase. Consumer choice is a bedrock principle of America’s economy. Ohio’s archaic prohibition against the direct sales of vehicles is unconstitutional, irrational, and harms Ohioans by reducing competition and choice and driving up costs and inconvenience.”
– Mike Callahan, Chief Administrative Officer, Rivian
While Mr. Callahan might be right about competition and choice, he probably went a little far in speaking of constitutionality and rationality. Still, you can understand his desire to keep costs lower with the direct-sales model. Building dealerships in the state would be hugely expensive for, what is thus far, nothing more than a boutique automaker.
Will Rivian win the lawsuit?
Rivan won a similar legal battle in Illinois in 2021 despite challenges from the state’s dealer association. All four EV automakers are working to open the bans on direct sales, which could mean a new model might become the norm in the next several years. Tesla has an agreement with Ohio that allows it to sell within Ohio, which might be the direction that Rivian goes to offer its direct-sales model in the state. This could be an intense and interesting battle.
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