One of the most ambitious electric-vehicle startups wants to change how people buy cars and trucks. He was able to make it easier to purchase models from the manufacturer at the time. Local car dealerships are powerful in politics.
Mr. Chen’s proposal to allow electric-vehicle manufacturers to sell from their own stores was defeated by the dealerships. Despite Rivian’s promise to build a $5 billion factory in Georgia, a similar bill he supported didn’t make it to the floor of the state legislature. There was another piece of legislation that died this year.
The son of Taiwanese immigrants who likes to wear cowboy boots is at odds with some of the most successful and wealthiest business owners in the country. There are 27 states where dealer franchise laws dating back decades and fiercely defended by dealer lobbyists prevent Rivian and other electric-vehicle startup from selling directly to consumers. During the last decade, Mr. Chen helped secure a limited arrangement for the sale of vehicles byTesla in nine states. Rivian andTesla don’t sell their cars through dealers.
Mr. Chen said it was a much tougher battle.
Independent dealerships play a critical role in the car-buying process, helping to create competition between franchises that ultimately keeps prices affordable for consumers. They say dealers provide important services, such as repair and warranty work, and arrange financing at competitive rates.
Don Hall is the president of the Virginia Automobile Dealers Association. The president of the National Automobile Dealers Association said that there are rules in place.
The car business could be affected by the outcome of this battle, as it could determine whether many manufacturers can set up retail operations in the U.S. without franchise networks. While still using dealers, some well-established auto makers, such as Ford Motor Co., are pushing for a simpler sales process that is similar to the one used byTesla. Fisker Inc., for example, has decided to sell directly to consumers rather than using independent dealers.
Rivian, an upstart maker of electric trucks and SUVs that is under pressure to show that it can increase production and get more of its vehicles to its customers, has been added to the list of things that need to be done. The company went public last year and was dubbed the “Tesla of trucks” by some investors. It burned through cash and struggled with setbacks on the factory floor. It delivered about 5,700 vehicles to customers in the first half of the year. The operating losses are expected to be over $5 billion in the next four years.
Most of Rivian’s vehicles are sold online and from one company owned store in California. The site of its first factory is where it processes online transactions and then ships vehicles to buyers. The transportation expenses drag on the company’s earnings. Rivian needs more company-owned stores to lower costs and boost deliveries at the same time, according to executives.
Customers of Rivian are frustrated with the added hassles. In May, Mark and his wife drove an hour to a Rivian event to be able to see and touch their car for the first time. He waited a long time for his truck to be delivered.
He thought it was ridiculous.
Rivian is trying to loosen the grip of local car dealers. Since the early part of the 20th century, auto dealers have been a fixture of American life. Independent dealers did a lot of work to find customers and advertise. There were more than 25,000 new car dealers in the US by the late 1980’s.
The dealerships were able to gain clout in their communities and state capitals by sponsoring everything from local baseball games to fundraisers.
Thanks to laws that restricted traditional car companies from setting up their own direct-sales operations, dealerships were able to stop attempts to upend the status quo. Ford tried to establish its own retail network in the late 1990s, but eventually abandoned it after running into opposition.
There was a new threat due to the rise ofTesla. It was possible for it to open a store in the Los Angeles area because it had never before used a franchise dealership.
Mr. Chen was hired by the company to be its lobbyist. He was an attorney who had worked for the EPA and two other law firms. He said he worked with the EPA to fix the tax credit issue.
He said that his approach as a lobbyist was to argue for free-market principles while also offering up a lot of evidence. He made a case to the local lawmakers that dealerships shouldn’t be able to dictate how consumers buy vehicles, and that making things easier for EV makers wouldn’t hurt the dealers.
The issue had something to do with him. The waterways between Taiwan and China were once patrolled by his father, who was a member of the Taiwanese navy. Mr. Chen was influenced by his family’s experience with China when he was a child. He said it would be a way to make sure China didn’t gain any national security advantage in the development of new technology.
Mr. Chen had personal connections with local legislators. While talking to an influential Republican state legislator in Idaho, the politician noticed that Mr. Chen was wearing cowboy boots. Mr. Chen, who has two boats and works as a ski patroller in his spare time, told the legislator that he had seven different pairs of boots and no dress shoes. There was a bill to ban direct sales of vehicles.
Joerg Sommer is a former Volkswagen AG executive who worked with Mr. Chen at another EV startup. He comes across as boring and conventional but he has a lot of smarts.
The state of Washington banned auto makers from owning their own stores in a victory for Mr. Chen. As legislation advanced, Mr. Chen cut a deal at the state capital that effectively exemptsTesla from the new prohibitions but closes the door for any manufacturer attempting to open company-owned stores after Jan. Similar laws were passed by some states.
He said it was a different era. No one else was putting EV products out on the table, so I didn’t go in there to say, “Hey, just grandfather us in, don’t worry about anyone else.”
He left because he was tired. He was on the road for 50 weeks and his dog died because he couldn’t take it to the vet. After taking some time off, he returned to the industry and worked at two other EV companies.
Mr. Chen is in charge of a group of six people who are based in Washington, D.C. Mr. Chen has teams in key battleground states.
Rivian has the most potential to attract buyers of its electric pickup and SUV in Michigan, New York and Georgia. After making it through smaller committees, he hopes to get his proposals scheduled for debate by the larger legislature.
Some dealers and lawmakers were willing to compromise when he was with the company. He said that dealers have hardened their stance due to the success ofTesla.
When he went back to Washington state to convince them to allow Rivian to sell directly to consumers, he found that they had done the same thing with Musk’s company. He worked with Senator Reuven Carlyle.
The proposal didn’t make it to the Senate labor and commerce committee. Lawmakers on the committee expressed concern that larger car companies would want to avoid local dealerships if Rivian got a pass. A Democratic member of the committee said that he was worried that the exception would lead to Ford asking for the right to sell their cars directly to us.
It was clear to Mr. Carlyle that the proposal wouldn’t get final approval. We wouldn’t fall on our swords. Mr. Carlyle spoke. He said that the fight for auto dealers was an “immense” one. They have a point of view.
In an age where many products can be purchased on the internet, dealers still provide an essential service. He said that if your car breaks down and you can’t get to work, a dealer will fix it and give you a new one. He said that it was not like buying a tube of toothpaste on the internet.
In Georgia, Mr. Chen was able to win a Tesla-only exemption. Mr. Chen said that Rivian believed that the state would allow it to sell directly to consumers if it built a factory there.
A Honda dealer in Georgia, Mr. Chen, flew down to Georgia for lunch near a popular fishing spot. Mr. Chen said that he thought they were getting along well. We discussed boots, fishing, and cars. I told him that I wasn’t his enemy.
Legislation didn’t make it to a vote on the floor of the legislature. Mr. Chen thinks Mr. Miller is responsible for that. The bill was stopped by the leader of the senate. Mr. Miller said he didn’t take part in the process and that local dealers pressured the senators who sponsored the legislation.
Mr. Miller didn’t lobby on the bill and didn’t have any involvement with it. Rivian knew what the score was in Georgia before they looked into a plant here.
There was opposition to legislation in Connecticut that would have allowed EV startup to run company-owned stores. “I don’t think we should be drafting legislation that works for one manufacturer, when every manufacturer has a stake.”
The only legislative victory for Rivian was in Colorado, where Mr. Chen and his team succeeded in amending a law to allow Rivian and other EV manufacturers to sell to customers without a franchise dealer.
In Louisiana, where in late August it filed a lawsuit saying state laws restrict its ability to sell cars directly to consumers, the company continues to push for changes. Mr. Chen would like to see more support from other EV makers. He said that they don’t want to be like Don Quixote.
There are no direct-sales bills currently on the floor of the statehouses. Rivian said he is giving up his fight in the state of Washington, where he will try to serve local customers from Oregon.
There are other adjustments that can be made. Rivian is considering opening storefront galleries in states where it hasn’t succeeded in getting direct sales banned. Customers won’t be able to purchase or test drive the vehicles. It’s also possible to find such galleries atTesla. It is an imperfect solution, Mr. Chen said, noting that even shoppers have to be dealt with on the phone.
Mr Chen said that you have to learn from your mistakes. You need to be open to looking at different strategies.
Tim was involved in the article.