Legislators steer Washington state toward direct electric vehicle sales, bypassing auto dealers

A bill working its way through the Washington state House would allow makers of electric vehicles (EVs) to sell direct to the public without involving an auto dealer.

The bill – HB 1388 – would permit manufacturers that produce only zero emissions vehicles to set up retail outlets in the state and sell to consumers here online.

At a virtual public meeting of the Consumer Protection and Business Committee on Wednesday, EV makers Tesla and Rivian testified in favor of the bill, while many existing auto dealers opposed it.

Tesla is currently the only car maker allowed to sell direct to consumers in the state, a peculiar situation that emerged because Elon Musk’s company was “accidentally granted a license by the Department of Licensing contrary to the law at the time,” according to Committee Chair Steve Kirby (D-Tacoma).

Following public pressure, Tesla was then grandfathered into 2014 legislation allowing it to continue to operate. A Tesla spokesperson said that the company had since invested $18 million in the state and now employs 250 people here.

Rivian’s first rugged all-electric pick-ups and SUVs are due to roll off the production line in Illinois this summer, and it wants to sell them direct to consumers.

“We know that such a business model can work, because this type of transaction is conducted in virtually every other industry and in every other part of the economy,” said James Chen, Rivian’s Vice President of Public Policy. “If I want to buy a MacBook, I can purchase it from Best Buy, or I can go to the Apple store. If I want to buy an orange, I can go to the grocery store, or the farmer’s market.”

Chen said that giving Rivian the freedom to sell directly to the public would not be a threat to existing dealer franchises but a victory for free market competition. He also pointed out that maintaining the status quo would cost the state in lost sales tax from EV purchases.

A broad coalition of EV makers, pressure groups and environmental groups, including Lucid Motors, Lordstown Motors, Drive Electric Washington, and the Sierra Club, also support the bill. In a written statement, they claimed the existing rules were holding back Washington from achieving its emissions reduction goals and from realizing benefits of widespread EV adoption that include advancing equity and economic recovery.

Admiral Dennis Blair of the Energy Security Leadership Council noted, “States that are open to direct EV sales see adoption rates of up to five times the rates of states that are closed, even in the absence of other direct incentives.”

Amazon, which has plans to purchase 100,000 electric delivery vans from Rivian and is also a major investor in the company, has not taken a position on the legislation. Bloomberg News reported Wednesday that Rivian is considering an initial public offering later this year at a valuation of $50 billion.

On the other side of the argument, Scott Hazlegrove of the Washington State Auto Dealers Association said: “We believe the independent franchise dealership model has proven to be the best way to sell and service cars, providing jobs, local service, local tax revenue, and community support.”

Jennifer Hannah, vice president of the Dick Hannah dealerships selling Toyota, Honda and Volkswagen cars in Washington and Oregon, called the bill an “immediate existential concern” to her business and employees: “We’re truly excited for the opportunity to sell electric vehicles to our customers, who appreciate the convenient and local service, warranty repair. and factory recall corrections we provide.”

Jaclyn Midkiff  of Harvest Honda and Chervolet in Yakima noted that direct to consumer brands like Tesla would likely only have branches in big cities, leaving many in the state without an easy way to buy or service their vehicles. “General Motors has announced that it’s transitioning to all EVs,” she also said. “This bill would qualify them to walk away from the agreement we’ve had in our family for almost five decades. It could be devastating.”

But emerging auto makers like Rivian, Lucid and Tesla see little benefit in sacrificing direct customer relationships and higher margins by participating in the dealer model.

“Third party dealers add a seven to ten percent margin to the cost of the vehicle and we simply do not want to give up our direct relationship with our customers,” said Chen. “Whether or not we are successful in this legislative effort, Rivian is not going to operate through franchise dealerships.”

The bill faces a long road through the state Legislature if it is to become law.