Will Rivian’s Big Factory Help Georgia Switch to Direct Sales?

0

Late last year, Rivian said it would spend $5 billion to build one of the world’s largest auto plants about 30 miles from Atlanta, hiring 7,500 workers.

While no one is suggesting that Rivian chose Georgia as a factory location just to get by with the state’s dealership laws, the company’s sudden newfound prestige in the state certainly won’t hurt.

“I can’t tell you we’ve had a lot of success with car dealerships,” said Rep. Chuck Martin, co-sponsor of Bill 460, which aims to allow new all-electric businesses to sell direct in Georgia. . “They have a monopoly, and they want to keep it.”

The Rivian investment — the largest in Peach State history — has caught the attention of lawmakers, who are considering three bipartisan bills that would allow makers of next-range electric vehicles to sell directly into the state. State.

The Rivian plant is creating buzz for the startup and raising the profile of electric vehicles in Georgia, Martin said.

“There are a lot more Braves fans after winning the World Series than before,” the lawmaker said.

The HB 460 sank in the 2021 legislative session but remains on the register this year. Meanwhile, two new Georgia Senate bills introduced in 2022 seek to expand a 2015 exemption given specifically to Tesla.

James Chen, Rivian’s vice president of public policy, said the automaker “supports” direct sales bills to the Georgia Legislature.

“We believe this is the right direction for our business model, and these bills would help us pursue this business model appropriately,” Chen said.

But Georgia auto dealers have a different perspective.

While the state’s exclusion of Tesla was limited to a single manufacturer, the new bills are broadly drafted to include new EV makers and their parent and subsidiary companies, noted Ben Jordan, senior director of relations. governmental for the Georgia Automobile Dealers Association.

Rivian supports legislation in Georgia that would allow makers of newer electric vehicles to sell directly to customers.
Rivian says the direct selling model promotes consumer choice and competition.

Georgia franchise dealers say they are well-equipped to sell and service electric vehicles and that the factory-direct model would cost jobs and hurt local businesses.

“The universe of manufacturers and their related entities [that the new bills apply to] is essentially unlimited, Jordan said. “The barn door is left open much wider.

Nearly half of US states allow manufacturers to sell direct under certain circumstances. Seven states allow an exception to single-manufacturer dealer franchise laws. But bills to allow direct vehicle sales have been introduced in at least 10 states, backed by electric vehicle startups but opposed by franchise dealerships.

Rivian, which started producing its R1T pickup last year, has been lobbying Georgian lawmakers for two or three years.

“It’s a battle between sound and proper politics versus political influence,” Chen said. “It’s about consumer choice, access to technology, open competition, versus the fact that dealers are in every city, state, small town.

“In many cases, it’s often the legislators.”

Butch Miller, acting president of the Georgia Senate, is also a Honda dealer in Gainesville, Georgia.

But $5 billion and thousands of new jobs could help Rivian counter the influence of the dealer lobby.

Chen said Georgia’s willingness to consider direct sales was an “important consideration” in Rivian’s site selection decision.

“One of those factors was whether the state was open to our business model or what they were willing to do to work with us on our business model, he said. “We certainly received a very forward-looking reception from the governor’s office.”

But Chen insisted that Rivian had received no assurances that he would prevail in the General Assembly.

“It’s not a tit-for-tat deal,” the attorney said of the plant investment. “It’s not a quid pro quo.”

Martin agreed: Rivian argued for HB 460 but “never linked the legislation, or its passage, to an investment in Georgia.”

As Rivian shifts lobbying efforts away from site selection decision, North Carolina triangular business diary reported that the automaker may have abandoned that state as a potential factory site after efforts to lobby there for direct sales failed to secure land. Like Georgia, North Carolina prohibits automakers from selling directly to consumers, but has exempted Tesla.

While negotiating with North Carolina over potential incentives for the factory, Rivian also pushed for a bill that would level the playing field with Tesla by allowing it to sell directly to customers, the trade publication reported on March 4, citing recordings obtained through a freedom of information. demand.

But the bill was never tabled.

On May 4, 2021, Rivian told the State that “the foundation of our business model is direct-to-customer sales and service.”

“Unfortunately, North Carolina law as it currently stands would prohibit us from being able to do this,” the automaker wrote to the state. “This issue alone makes it very difficult for us to dive any deeper.”

According to the report, on July 30, Rivian told the state that a “commitment to a level playing field” was the only way to move the project forward.

Chen argues that, with or without factory investment, Rivian’s direct sales model is good for Georgia.

This is “to give Georgians the right to be able to buy the vehicle as they wish”, he said. “I’m optimistic…legislators will have the political courage to vote for policy that helps support and promote local businesses looking to invest in the state.”

But franchise dealers in Georgia say Rivian’s significant investment in the state does not warrant a change in state law designed to protect consumers.

Dealership agreements and franchise laws ensure consumers “get the best product, backed by good service, and if something goes wrong, there’s protection for them,” said Jimmy Ellis, president. of Jim Ellis Automotive Group, based in Atlanta.

Dealerships say they are fully capable of selling and servicing electric vehicles as their former franchises also pivot to electrification. Currently, there are 31 all-electric models available for purchase in the United States, with at least 10 more expected by the end of the year, according to Guidehouse Insights.

Dealerships are investing millions of dollars in training, equipment and charging infrastructure to sell and service next-generation vehicles, said Ellis, whose group operates 20 stores representing 17 brands.

“We’re all about electric vehicles – we know how to do it, and we’ll be the absolute rock stars when they really start rolling out,” he said. “There is simply no need for a separate distribution, sales and service channel for motor vehicles, especially when they are riskier and do not offer the efficiency and effectiveness of the franchise network system.”

Ellis, a board member of the state dealer association, points to Tesla’s well-documented struggles with service capacity as a potential challenge automakers face when taking over the sell-side at company detail.

“You have customers waiting days for repairs,” he said. “If your goal is to provide the customer with an exceptional ownership experience, that hasn’t gotten better for me.”

Rather than emulate the Tesla model, Ellis has this suggestion for Rivian’s board: “I would start looking at what is about to be a tidal wave of competition, and I would strike at the Jimmy Ellis’ door saying, “Look, I’m thinking back now — you might be the best person to get me started on the right foot in Georgia.”

Dealerships see direct sales as an existential threat, and some see legislation like the one Rivian is proposing in Georgia as a slippery slope.

“Very soon, the old makers are like, ‘Well, they’ve all come in, why not us?’ That’s the heart of the concern,” Ellis said. “It’s death by a thousand cuts, except it won’t take a thousand cuts.”

The mistrust is not unfounded.

Last year, Volvo Cars announced plans to sell its battery electric vehicles through an online model, delivering customers’ pre-ordered vehicles to dealerships rather than having retailers stock hundreds of new cars. Meanwhile, Ford wants to craft a new set of operating standards for electric vehicle sales that would include the most popular aspects of the direct-selling model popularized by Tesla.

Dealer associations say encouraging direct sales will cost jobs and hurt local businesses.

But according to the Michigan-based Mackinac Center for Public Policy, traditional auto sales and dealership revenue have increased nationwide since 2012, when Tesla introduced the direct-selling model, with sales up by 52% and employment growth of 18%. States that are partially or fully open to direct sales outperformed the national average, with sales growth of 58% and job growth of 21%.

“It shows that the doomsday scenarios that the dealers portray are not based on facts,” Chen of Rivian said. “Competition is a good thing compared to protectionism, which is basically what dealers stand for.”

Urvakch Karkaria writes for Crain’s sister publication, Automotive News.

Share.

Comments are closed.