EV Makers Say State Dealership Laws Complicate Direct Sales

Electric vehicle makers Rivian, Lucid Motors and Scout Motors are navigating a state-by-state patchwork of dealership-franchise laws that limit direct sales to consumers. The laws, written decades ago to govern relationships between traditional automakers and their franchised dealers, restrict where and how newer EV companies can sell vehicles.

As EV sales slow, the manufacturers say making purchases easier has become more important. The companies told Business Insider that the restrictions can create a fragmented customer experience. In some states, prospective buyers may view a vehicle or receive service but cannot test-drive it, discuss pricing or complete a purchase at the same location.

The manufacturers said direct sales allow them to control pricing, educate first-time EV buyers and avoid relying on third-party dealers unfamiliar with the technology. A spokeswoman for the National Automobile Dealers Association said the franchise laws protect both consumers and dealers.

"Franchise laws protect consumers as well as dealers — that's why they've been part of the fabric of America for many years," she told Business Insider. The company filed a lawsuit last year against the Ohio Bureau of Motor Vehicles challenging limits on direct-to-consumer sales.

Rivian cannot obtain a dealer license in the state but can operate service facilities to fulfill warranty obligations. At those service centers, staff can answer basic questions about the vehicles but cannot discuss pricing, financing, purchasing or offer test drives.

"If you're an Ohio resident and want to drive one of our cars, we cannot offer that to you," Whiteman said. Ohio customers must complete purchases online, and in some cases Rivian processes the transaction in Illinois where it holds a license. Customers may need to pay for a temporary Illinois tag and complete power-of-attorney forms before the company submits paperwork to the Ohio DMV.

"You can just see how it's complicated and convoluted and inefficient," Whiteman said. The Ohio Automobile Dealers Association disputed that characterization, saying state law allows Rivian vehicles to be sold through an independent dealer of the company's choice and that the process is not convoluted.

Motors is permitted to sell directly to customers in fewer than half the states. Daniel Witt, head of public policy at Lucid Motors, said the restrictions can lead to awkward customer interactions and create legal risks for retail employees. Workers must track which topics they may discuss and which could create compliance issues, while many customers remain unaware of the state-specific limits.

"You're dealing with retail employees. They're not legal experts, but they have all these red lines that they have to consider," Witt said. He added that the employees are placed on the front lines for compliance. In states where other EV makers have secured certain sales rights, Lucid can sometimes discuss prices, offer test drives and provide warranty service but still cannot complete the final sale or title the vehicle.

Witt said this separation can create additional financial burdens for buyers related to taxes and registration.

Motors, relaunched in 2022 as a Volkswagen Group subsidiary, has not yet begun customer deliveries scheduled for 2028. Cody Thacker, Scout's vice president of commercial operations, said the company evaluated multiple business models before selecting direct sales and has since aligned its sales and service plans with varying state laws.

The company cannot sell vehicles directly to customers there. Thacker called the situation tragic. "We are in this position where we have to tell the people who build Scout vehicles that they have to drive to Tennessee to buy the product that they make," he said.

A spokesperson for the South Carolina Automobile Dealers Association did not respond to a request for comment. Thacker said the laws are not existential for EV companies but should support rather than hinder U.S. startups seeking to grow and compete globally.

"The United States market and the auto industry specifically does not exist in a vacuum, and this is a point in time where the winners and losers for the next hundred years are being selected," he said.