A bill that would have allowed EV makers such as Rivian to bypass the franchised dealer network and sell directly to the public was given the thumbs down by Colorado legislators on Wednesday.
HB 1325 was rejected 35 to 30 in the Democrat-controlled Colorado House of Representatives.
It's a victory for the state's auto dealers, who argue direct sales of vehicles by automakers threaten their investment and businesses and are in violation of state franchise laws that require automakers to sell new vehicles through independent dealers.
Franchise dealers invest, on average, about $20 million in each store, said Tim Jackson, CEO of the Colorado Automobile Dealers Association.
The franchise laws also protect the consumer when an automaker goes bankrupt or closes shop, dealer groups say.
"In most situations, dealers will still operate on dealer street even if the manufacturer goes way," Jackson said. "We've seen dealers buy back cars (from customers) after a manufacturer went out of business."
Opponents of HB 1325 stepped up their lobbying efforts after Ford announced a $500 million investment in EV maker Rivian earlier this week. The startup plans to sell its electric pickup and SUV directly to consumers. Rivian expects to use dealer networks for service and support.
HB 1325 would have made it easier for new entrants, such as Rivian, and traditional automakers to adopt a direct-sales model for their EV business, Jackson said. "All automakers are moving toward EVs," he said.
Rep. Jovan Melton, D-Aurora, said the law was being written for Rivian.
"Is this bill really about helping a small company begin to get some market share, or is [it] about allowing a manufacturer to directly compete against dealers?" Melton said on the House floor. "As we see electric vehicles become more and more of a trend ... it's only inevitable that the large manufacturers are going to come in and turn their fleets all EV and this bill is so broad that it allows for those manufacturers to directly compete against these small business owners."
HB 1325 co-sponsor Rep. Chris Hansen, D-Denver, said the bill was an effort to level the playing field for all EV manufacturers.
California-based Tesla sells its electric vehicles in Colorado under a loophole — a nearly two-decade law passed for a defunct bus manufacturer in Lamar, Colo., that allowed a factory to sell vehicles directly to customers if they don't have any franchised dealers.
"We simply want an even playing field for other EV manufacturers so they can have the same treatment as we have already granted Tesla," Hansen said on the House floor.
"This is a time for Colorado to take a step forward, provide more choice for our customers, allow new products to come to market, and not be kept out of the market because of the dealership incumbency model."
HB 1325's legislative defeat, however, might not be enough to keep the auto industry from flirting with a direct-sales model.
Rivian and other automakers could use the same loophole to sell vehicles directly to consumers in Colorado, Jackson said. However, they would be limited to a single dealer license based on a state law passed about a decade ago.