April 12, 2021 12:00 AM

Direct-sales efforts heat up in states

Bills to allow direct vehicle sales, backed by electric vehicle startups but opposed by franchised dealers, have been introduced in at least 10 states.

Direct-sales bills at a glance

States that have introduced legislation this year related to direct vehicle sales by auto manufacturers:

Connecticut
Would allow a manufacturer to receive a dealer's license if it does not have a franchise agreement with a new-car dealer in the state, if it builds only electric vehicles and only sells the vehicles it builds, and if it does not have a controlling ownership link to a manufacturer licensed as a dealer in the state.
Status: Passed out of joint transportation committee on March 24. Awaiting a vote in the full Senate.
Read the bill

Georgia
Removes language that caps manufacturers' ability to own or operate dealerships at five locations and only for automakers in operation as of Jan. 1, 2015.
Status: Did not pass this year, but it remains under consideration and could be revisited in 2022, according to the Georgia Automobile Dealers Association.
Read the bill

Kansas
Would allow an auto manufacturer to own or operate a dealership, with no language that they sell only electric vehicles among the provisions.
Status: The bill did not pass during this legislative session, according to the Kansas Automobile Dealers Association.
Read the bill

Massachusetts
Would allow an auto manufacturer to own or operate a dealership if it previously had no franchise agreement with a dealer in the state, with no requirement that the dealer sell only electric vehicles.
Status: Introduced, not yet referred to committee
Read the bill

Nebraska
Would allow manufacturers to own or operate dealerships if they do not or have not had "any franchisees representing such manufacturer's line-make of motor vehicles," and only sell "the line-make of motor vehicles" that it builds.
Status: In committee
Read the bill

Nevada
The bill will not advance this year because it did not pass out of a committee by the Friday, April 9, legislative deadline.

New York
Would allow a manufacturer that "manufactures or assembles exclusively zero-emissions vehicles" and "has no franchised motor vehicle dealer of the same line-make" in the state to operate direct-sales locations.
Status: In committee
Read the Assembly bill and the Senate bill

Ohio
Would allow a manufacturer to own, operate or control "one or more licensed motor vehicle dealerships if, as of [Jan.] 1, 2021, the manufacturer is a manufacturer of all-electric motor vehicles with corporate headquarters and manufacturing facilities in this state," according to the bill language. Bill sponsor said it is applicable to Lordstown Motors.
Status: In committee
Read the bill

South Carolina
Would allow "a manufacturer of only all-electric motor vehicles" to "sell, directly or indirectly, all-electric motor vehicles that it manufactures to consumers" in the state.
Status: In committee
Read the bill

Texas
Would allow a manufacturer to own or operate a dealership if it "manufactures or distributes motor vehicles powered only by electricity or battery" and "the manufacturer's line-make has never been sold in this state through an independent franchised new motor vehicle dealership."
Status: Referred to committee
Read the bill

Vermont
Would define a "non-franchised zero-emissions vehicle manufacturer" as one that manufactures zero-emission vehicles, "only sells or leases directly to consumers new or used zero-emission vehicles that it manufactures," and does not and has not sold through a franchisee in Vermont, among other provisions. The bill also defines what it means for a manufacturer that is not a non-franchised zero-emissions vehicle manufacturer to compete with a new-car dealer in the state. The Vermont Vehicle and Automotive Distributors Association said the bill is considered a compromise.
Status: Passed the Senate; in House committee
Read the bill

Washington
Would allow a manufacturer that "produces only zero-emissions vehicles" to own or operate a new-vehicle dealership "that sells new vehicles that are only of that manufacturer's makes or lines and that are not sold new by a licensed independent franchise dealer."
Status: Will not pass this year, according to the Washington State Auto Dealers Association, though it's possible — but unlikely — that a similar provision could be added to a different bill.
Read the bill

Startup electric vehicle manufacturers are pursuing legislation in multiple states that would allow them to sell directly to consumers.

Franchised auto dealers and traditional automakers generally oppose the bills, some form of which have been introduced in at least 11 states this year, according to an Automotive News analysis. The legislative effort is the latest round in a yearslong debate in statehouses across the country over whether vehicle manufacturers can bypass franchised dealerships to sell their products.

Some proponents and dealer advocates alike say it appears the direct-sales push is gaining steam. National Automobile Dealers Association CEO Mike Stanton told Automotive News last week that direct-to-consumer sales are among the top three issues the trade group is monitoring.

"It's like the heat has been turned up just a little bit," Stanton said, adding that NADA believes franchised dealers will be essential to the widespread deployment of EVs. "It's certainly nothing new, but it seems to be more of a hot topic right now."

Stanton: NADA has eye on issue

The direct-sales effort is converging around electric vehicles as EV-only startups Rivian, Lucid Motors and Lordstown Motors aim to enter the market with an interest in following Tesla's model. The new entrants are lobbying state legislatures to open up laws that prohibit manufacturers from selling directly to consumers or that carve out a narrow exemption for Tesla. Rivian has said it doesn't intend to mass-produce vehicles to sit on dealership lots, but rather to build to customer specifications. Lordstown, meanwhile, has said the direct-to-consumer model fits its focus on commercial fleet buyers.

"I don't preclude [franchised dealerships] from ultimately being able to sell electric vehicles or sell a lot of electric vehicles," said Daniel Witt, Lucid's head of public policy. "I do think that there's enough space for both business models to ultimately be successful."

At the same time, traditional automakers are stepping up commitments to electrify their lineups — with some brands, such as Volvo and Cadillac, planning to phase out internal-combustion engines altogether.

The Alliance for Automotive Innovation, which represents several major automakers and some suppliers and tech companies, is aligned with dealers in opposition to legislative efforts in multiple states, a spokesman said. The alliance said the bills would create different sets of rules for different companies.

"With the entire auto industry transitioning to an electric vehicle future, and the prospect of automakers bringing 130 new EV models to the public in the next three years, there is nothing warranting this special treatment," the alliance said in an emailed statement. "All sellers of electric vehicles should be governed by the same laws."

The scope of the bills varies. Ohio lawmakers, for instance, are targeting a narrow exemption for Lordstown Motors, which is based in the state. In Nevada, a bill would remove a cap on direct sales that has been limited to manufacturers that built and sold only their own EVs on or before Jan. 1, 2016 — in essence, Tesla. By striking the date restriction, Nevada's bill language does not prohibit an EV manufacturer that has a franchise network from selling directly. The bill's fate was uncertain as of press time Friday, April 9.

But to sell directly in Connecticut under a bill there, manufacturers couldn't have franchise agreements with new-car dealers in the state, nor could they have a controlling ownership link to a manufacturer licensed as a dealer in the state. They also would be required to build only EVs and sell only the vehicles they build.

"We want to have a level playing field in Connecticut," said Sarah Fryxell, president of the Connecticut Automotive Retailers Association, which opposes the bill. "And if you sell cars in Connecticut, you abide by the franchise laws."