State-level franchise laws are creating significant hurdles for automakers like Rivian and Tesla, which rely on direct-to-consumer sales models. Rivian CEO RJ Scaringe recently criticized these regulations, describing them as “horrific” and alleging they result from dealer lobbying efforts that stifle competition and limit consumer options.
“These laws make it really hard for us to interact directly with the consumer,” Scaringe said during a roundtable with reporters. He went on to argue that such rules protect entrenched dealer networks at the expense of new manufacturers who don’t operate traditional dealership models.
Dealer franchise laws, designed decades ago to prevent manufacturers from undercutting their own dealership networks, now serve as barriers for companies like Rivian, Tesla and potentially Volkswagen’s new Scout Motors, which aim to sell vehicles directly to consumers. In states like Texas, Tesla cannot sell vehicles through company-owned stores and must rely on online sales and delivery at service centers. Similarly, in Washington, Rivian representatives are barred from discussing pricing or taking orders at their physical locations.
“These laws were intended to protect dealerships from their own manufacturers, but now they’re stifling competition for new brands,” Scaringe noted.
The issue extends to service networks as well. While Rivian’s recent partnership with Volkswagen has sparked speculation about potential service collaborations, Scaringe said using VW’s service centers in the U.S. would be unlikely due to regulatory hurdles. “The issues we face with direct-to-consumer sales become exacerbated if we were to use a mixed model,” he said.
Rivian has prioritized building its own service infrastructure, with more than half of its current service visits handled by mobile technicians. However, Scaringe acknowledged that scaling service capabilities remains a pressing challenge. “We have a service backlog where we’re trying to build as much service infrastructure as fast as we can,” he said, adding that the company is considering service partnerships in Europe.
Despite these challenges, Scaringe remains optimistic about Rivian’s long-term service strategy. “You don’t need 5,000 retail locations in the United States to sell 3 or 4 million cars a year. Tesla is a good example,” he explained, noting that technological innovations like vehicle self-diagnosis can help improve efficiency.
