Rivian CEO RJ Scaringe is not a fan—to put it mildly—of current U.S. laws that he sees as protecting franchised auto dealers.
The electric vehicle company has gone the direct-to-consumer model to sell its vehicles. But much like fellow EV car company Tesla, the company has had to navigate protections for car dealers codified into state laws that protect dealers from having to directly compete with manufacturers.
“In the United States it’s not an easy question. We have this horrific state-by-state level of rules that are as close as you can get to corruption,” said Scaringe in a story recently published by InsideEVs. “I think you essentially have, like, lots of dealers have paid for laws that make it really hard for us to interact directly with the consumer.”
Direct-to-Consumer Fight
Franchised dealers and their associations have vowed to fight the rise of the direct-to-consumer models. Legal battles are expected to occur state-by-state due to no unified federal guidelines, underscoring the complex environment facing direct-to-consumer EV sellers.
At the front of this battle are auto dealers strategy to contest Volkswagen‘s plan to sell Scout Motors cars directly to consumers. Scout Motors CEO Scott Keogh recently stated he expects the electric SUV and truck brand will have around three dozen U.S. retail centers when sales begin in 2027, eventually rising to 100. VW is building a $2 billion factory in South Carolina and expects to begin production of the new vehicles that same year.
But the decision to bypass independent retailers is being challenged by the National Automobile Dealers Association (NADA), with CEO Mike Stanton stating their organization and state associations “will challenge this and all attempts to sell direct in courthouses and statehouses across the country.”
Rivian-VW Deal
Attorney Richard Sox, representing dealer associations, noted Scout’s affiliation with VW complicates its legal standing in several states and they could face significant pushback, given that franchise laws in most states bar automakers with dealer networks from engaging in direct sales. Sox added that his firm already works with at least 10 state associations, each examining legal avenues to challenge the proposed sales model.
Scaringe’s comments come after his company entered into a joint venture with Volkswagen to create electric architecture and software for next-generation software defined vehicles. The goal is to bring next-generation electrical architecture and best-in-class software technology for both companies’ future electric vehicles, covering all relevant vehicle segments, including subcompact cars.
Expanding Service Options
A priority for Scaringe is expanding service options but believes the company’s direct-to-consumer push “become exacerbated if we were to use a mixed model” where they have directly owned and franchise service centers.
Currently, Rivian vehicles can diagnose and report its own problems. Rivian has the ability to do service in the owner’s driveway—over half of the company’s current service visits are handled by its mobile service arm, according to officials.
VW’s service network could be a solution, but Scaringe casted doubt on that option due to the powers of franchised dealers.
“You don’t need 5,000 retail locations in the United States to sell three or four million cars a year. Tesla’s a good example. [Its] number of retail locations per sale is far, far lower than any of the incumbents. But you do need a lot of service infrastructure,” he said.
