Rivian Wins The Direct Sales Fight In Colorado Thanks To A New Law, But There’s A Catch

The hitch in the deal applies to legacy automakers, not exclusive EV makers like Rivian or Tesla

2020 Rivian R1S

Electric automakers like Rivian (and indeed Tesla) aim to shake up the status quo. Not just by building a whole range of pure-electric vehicles, but by changing the atmosphere of the car buying experience itself. The Plymouth, Michigan-based electric startup hopes to begin production by the end of this year, but it faces a challenge its legacy rivals like Ford, GM and Toyota don’t have to face. It currently has no franchise dealer network to distribute its vehicles to customers. Now, though, thanks to the signing of a new direct sales bill into law in Colorado, Rivian can now handle its own transactions without having to set up a system similar to other automakers.

In some states, Tesla has managed to get around that limitation by selling vehicles directly to customers through its own in-house store network. Rivian wants to do the same, but many state laws prohibit direct sales to consumers. Dealer associations, including here in Colorado, promote the current business model, and one of the biggest arguments for it is the layer of support in part offered by a franchise dealer’s degree of separation from the manufacturer. By acting as the retail point of contact, consumers are better able to get sales support and parts because they aren’t having to go directly to the manufacturer. On the other hand, proponents for direct sales argue that franchise dealers can sour the buying experience, and it presents a middle-man that can actually inhibit customers getting a direct response from the automaker when it comes to sales or any kind of after-sale support.

2020 Rivian R1S

Changing the current law

In 2010, Colorado banned direct sales to consumers. By that point, Tesla already had a store in the state, so it was grandfathered into the law. That meant that no automaker besides Tesla could actually sell directly to consumers, but this bill, signed into law by governor Jared Polis earlier this week, changes the landscape a bit. Here’s the current bill summary:

“Current law states that, with certain exceptions, a motor vehicle manufacturer may not own, operate, or control any motor vehicle dealer or used motor vehicle dealer in Colorado. The bill creates a new exception that allows the ownership, operation, or control of a motor vehicle dealer if the manufacturer makes only electric motor vehicles and has no franchised dealers.”

That last part was meant to exclude current “legacy” automakers, like Ford, GM or Nissan, which have or are developing pure electric vehicles. Even if they changed their entire lineup to EVs, they would still have to go through the current franchise dealer system. Originally, the bill was written to allow any automaker who produced an EV to sell directly to customers. However, the Colorado Automobile Dealer’s Association cried foul, saying it would allow automakers to side-step their dealer network with their EVs. CADA has also fought against EV mandates within the state, saying it would force EVs onto dealers that may not be able to sell them within the state, resulting in unwanted inventory.

Rivian R1T

Rivian’s plan?

Now, the question shifts from whether Rivian will sell directly to customers in Colorado at all to how they’ll work out their own infrastructure to do so. Tesla is still building out its sales and support network within the state, and Rivian will have to do the same to compete. It still also faces franchise dealers, who account for the vast majority of new vehicle sales in the state. Nevertheless, we’ll see more about how Rivian will build out its sales network in the coming months and years. More to the point, those in Colorado who are looking to buy a Rivian R1S or R1T in the state can now do so, thanks to this new law.