‘Getting as close as possible to corruption’

• Rivian CEO RJ Scaringe says dealer franchise laws are “as close to corruption as you can get.”
• Many states have laws that restrict manufacturers from competing with dealers, but what that means varies by state.
• Some states still don’t let Tesla or Rivian sell cars, and those states tend to have powerful dealer lobbies.

Despite the recent collaboration with the German car giantAccording to CEO RJ Scaringe, Rivian has no plans to use Volkswagen’s sales network. It wouldn’t want to. But VW’s service network is a much more interesting proposition, as scaling the service has proven difficult for Rivian and fellow direct-to-consumer automaker Tesla. Unfortunately, using VW service centers in the US will likely not be possible. Scaringe told reporters that dealers have made that virtually impossible.

“Unfortunately, in the United States, it’s not an easy question. We have a horrific level of regulations that are as close to corruption as possible on a state-by-state basis,” Scaringe said. Indoor EVs and other reporters during a roundtable discussion.

“I think a lot of dealers have paid for laws that make it very difficult for us to communicate directly with consumers,” he continued.

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Victoria Scott / Motor1

Many states have written into law protections for car dealers. They broadly protect dealers from direct competition with manufacturers, but the way these rules are interpreted and applied varies greatly. In Tesla’s home state of Texas, the company cannot sell cars from company stores. Instead, it must sell cars online and deliver them to “service centers.” Rivian’s Seattle space is similar in that the company’s Washington representatives can’t discuss pricing or take orders.

These laws, in most cases, were intended to protect dealers from their own manufacturers who sold directly to consumers, cutting out the middleman and outcompeting them on costs. But they are now suffocating brands that don’t have dealers to compete with. There is no AutoNation Rivian or Penkse Tesla losing sales when these companies sell in Texas or Washington. There is no option at all if you are a consumer I want to buy a Tesla and have it delivered to Louisiana. These laws therefore effectively protect dealers of other brands from legitimate competition with new brands.

The states with the strongest dealer protection laws tend to have extremely large and powerful car dealer lobbies, which give wine, dinner, and donations to local politicians to ensure they have enough friends in state government. These friendly relationships tend to correlate with laws that make it nearly impossible to purchase a car without involving a dealer in the transaction. It’s not hard to see why Scaringe says this is essentially ‘corruption’. They spend enormous amounts of money on lobbying and are rewarded with laws that limit consumer choice and competition while protecting their profits.

Since the laws are different in every state, you have to grease a lot of wheels to get the train moving. There are still states where it is illegal to sell Rivians or Teslas directly. And there are many states where dealers plan to challenge Volkswagen’s plan to launch Scout Motors with a direct-to-consumer modelà la Tesla. If even one challenge in a large market succeeds, it can throw the entire plan into disarray. Because while it’s hard enough to sell vehicles directly to consumers, it becomes even more difficult when you also have franchises that operate as official sales and service locations.

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All the problems Rivian faces with its direct-to-consumer push “are exacerbated if we were to adopt a mixed model,” where they own direct properties and franchise service centers, Scaringe says. So it’s probably not possible to use VW dealers for service, even if VW was cool with it. But the CEO is still clear that expanding service options should be a priority, not just providing service where you sell cars.

“You don’t need 5,000 retail locations in the United States to sell three to four million cars a year. Tesla is a good example. The number of store locations per sale is much, much lower than that of the incumbents. need a lot of service infrastructure,” he said.

The vehicle’s ability to diagnose and report its own problems will help improve service efficiency, as well as Rivian’s ability to perform most maintenance in your driveway. More than half of the company’s current service calls are handled by its mobile service department. But the fact is that the services infrastructure must grow, no matter how difficult it is to navigate US state-by-state restrictions.

“We have a service backlog where we’re trying to build as much service infrastructure as quickly as possible. But in some markets, product scaling has happened faster than we can build the service infrastructure,” Scaringe said. “That’s an anomaly in the short term. In the long term, we think we’re going to build a really robust service infrastructure in the United States. In Europe, the question is: we’ll do the sales alone, but will we partner with someone in service. It’s definitely an opportunity.”

If Rivian needs a service partner in Europe, I know a company in Wolfsburg that can probably call it.

Contact the author: [email protected].