This week, electric vehicle manufacturer Rivian sued the Ohio Bureau of Motor Vehicles to compel the state to ban direct-to-consumer vehicle sales. Rivian is among several new EV startups that, following the Tesla way, have been moving away from traditional dealership-based car sales. Right now, however, this remains illegal in many states.
The Rivian sues Ohio restriction on direct vehicle sales can be traced back to the early automotive age, when there was some concern that the major American car manufacturers might get too vertically integrated. Yet these laws also had the backing of the car companies, since by selling their vehicles through franchised dealers, they did not have to go through the expense of running an extensive distribution network. Also, they could instead turn their money into production lines and manufacturing facilities.
The arrangement remained mostly unchanged until early 2010, after the 2009 Justice Department report said the laws hurt consumers, and a new car company called Tesla started to seek an alternative route. There was an attempt by Tesla in 2013 to have the Obama administration change legislation pertaining to direct car sales by submitting a We the People petition.
The following year, the Federal Trade Commission came out on Tesla’s side and said that dealership regulations were, in fact, detrimental and anti-competitive. Coincidentally, in that very same year, Massachusetts also went ahead and gave Tesla the green light to sell its vehicles directly to the consumer, but the matter did not go the latter well in Georgia.
Later, this coalition of auto dealers challenged the state of Missouri before the courts in 2016 and won the case because Missouri permitted Tesla to create a franchise within the state for selling cars. In 2017, furthermore, the courts of Utah decided that state regulators could forbid car manufacturers from owning interests in dealerships. Tesla’s continuous lobbying has seen the permitted states of selling its vehicles increase considerably, amidst lawsuit over self-driving technology, this has been by way of exemptions granted exclusively to Tesla, whereas other OEMs are still prohibited from selling directly.
