(Bloomberg) -- Tesla Inc. has been a trailblazer for direct-to-consumer sales, but the path for other electric-vehicle startups is still pretty thorny.
Plug-in truck maker Rivian Automotive Inc., which aims to begin selling its R1T pickup and R1S SUV late this year without a franchised dealer network, had hoped to build its first store in Colorado, where Tesla has three. But almost a year after raising the idea with state legislators, its still lobbying them -- with EV enthusiasts and car dealers lining up to testify for and against.
Rivian will instead open its first showrooms in California, which makes it easier for newcomers than most other states that have tough, decades-old franchise laws designed to protect car dealers.
Tesla has spent years lobbying states to loosen these laws, which ban car manufacturers from owning or operating their own stores. Tesla, which sells cars at fixed prices online, now has showrooms or galleries - spaces to display vehicles without technically selling them -- in 28 states. It did that largely by finding loopholes and negotiating deals limited to its own business.
The Model 3 maker reached a settlement last month in the home state of General Motors Co. and Ford Motor Co. when a Michigan court effectively allowed Tesla to bypass laws preventing most auto manufacturers from selling directly to consumers.
To pry open the door further, Rivian is waging a state-by-state campaign on behalf of its operations and those of others to come. The effort is led by Jim Chen, a former Tesla lobbyist whos now vice president of public policy at the Michigan-based startup.
These laws were never intended to shut out competition between different brands, Chen said by phone last month. A manufacturer should freely be able to choose whether it wants to enter the franchise system or sell directly.
Dealers, of course, feel differently. They say cars arent suited for online-only sales and that franchise laws protect consumers. Tim Jackson, president of the Colorado Automobile Dealers Association and a vocal Tesla critic, helped kill Rivians proposal last year, which would have allowed any company solely making EVs to sell them in Colorado without dealers.
We dont want to further broaden, or further make accessible the factory-to-consumer direct sales model, Jackson said in an interview last month. We prefer, of course, the franchise model.
Jackson was back at the legislature in Denver on Feb. 18 with a posse of dealers to thwart Rivians latest proposal, which would expand the carve-out to any car manufacturer with EVs to sell. The bill has survived in the state senate so far, in part with new language that addresses dealers fears by reiterating their exclusive rights to sell existing brands in specific geographic areas.
One might think Colorado, which became the 10th state to adopt Californias electric-vehicle mandate last September, would be relatively friendly territory for Rivian. But even with bipartisan sponsorship and the backing of newly elected Democratic Governor Jared Polis, passage seems far from assured.
With an onslaught of new electric models coming from automakers like Ford and Volkswagen AG, dealers worry that such exceptions could give all manufacturers free rein to compete directly against them.
Traditional carmakers are already beginning to shake up their retail models to sell EVs. Volkswagen announced Feb. 19 its using a new approach in Germany for its ID family of electric cars. Dealers will receive a commission and bonus but will no longer negotiate price or arrange financing or insurance -- an important profit source.
Other startups intend to follow Teslas lead. California-based Lucid Motors Inc. wants to sell its luxury electric sedan, the Air, through its own network of stores.
Rivian, which raised nearly $3 billion last year from investors including Amazon.com Inc. and Ford, has also introduced bills in Washington, New York and Pennsylvania. At the same time, it plans to open stores in friendlier states including California, Florida, Massachusetts and Utah, Chen said. The first ones will open around Los Angeles and San Francisco in the next year.
Like Tesla, Rivian will allow people to set up a test drive, configure, order online and take home delivery.
Story continues
Its also planning a subscription service that will include finance and insurance, following the lead of Porsche and Volvo Cars, Chief Executive Officer R.J. Scaringe said in an interview last month. Volvo dealers in California last year petitioned state regulators to investigate the companys Care by Volvo program, arguing it violates franchise laws.
The plan to service cars is still a bit opaque, leaving Rivian open to criticism that it cant provide adequate maintenance for its vehicles. But Chen told legislators at the hearing in Denver this month that Rivian plans to establish service centers and mobile service teams -- like Tesla does -- and that it may rely on its strategic investors for help with infrastructure to distribute auto parts.
The automotive arm of privately held Cox Enterprises Inc., which owns a stable of auto businesses including Kelley Blue Book and Manheim auction services, put $350 million into Rivian in September. Thats raised the hackles of some dealers, who share data and buy ads and used cars from Cox.
We do business with Cox Automotive, said Thom Buckley, a Colorado dealer who testified at the hearing. Im very concerned about doing business with a vendor who will compete with us.
--With assistance from Ed Ludlow.
To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson
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