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Do state franchise laws hinder electric vehicle adoption?

Another year has passed with no resolution to the battle between franchisees – which had a strong 2021 thanks to weak supply and strong demand – and the direct selling model pioneered by Tesla. styled and is currently handled by Rivian and Lucid.

This is a familiar story to anyone who has followed the evolution of EVs over the past decade, but the longer it continues, the more it will hamper EV sales, a recent argument has argued. Bloomberg opinion piece.

Most states have franchise laws that require automakers to rely on independent dealers. This was largely unchallenged until Tesla started selling cars, choosing to do so through its own stores and website.

Lincoln Stores and Dealers

Lincoln Stores and Dealers

That led to outcry from sympathetic agent groups and lawmakers. In 2014, Michigan has changed its statutes to close loopholes that could allow Tesla to sell cars in the state that is home to the Detroit Three automakers. Tesla and the state government have reached a compromise on a 2020 solution that will allow the automaker its auto maintenance, but still don’t actually sell them. That was even challenged in a proposed law that passed the Michigan House of Representatives, but was not absorbed by the Senate.

When it came to the direct sales plan, Tesla argued that it was necessary to give electric vehicles a fair chance in the market. This opinion echoes that thinking, arguing that a franchisee’s main task is to get cars out of the lot quickly, and then generate additional profits by servicing them.

However, electric vehicles require a higher level of customer education about things like range, charging and single-pedal driving, the authors note. That requires salespeople to spend more time on an EV sale. Lower maintenance needs also limit potential revenue from maintenance.

Lucid Studio - Newark, CA

Lucid Studio – Newark, CA

These conflicting priorities may have impacted electric vehicle sales. While it notes that correlation is not causative, the section notes that Florida has much higher sales of electric vehicles than New York, despite not having state subsidies. However, New York limits direct sales, while Florida does not.

Boosting dealers’ profits from each transaction can also get customers excited about new electric vehicles. Many of the most anticipated new models (electric and others) have seen massive price increases in 2021 as dealers look to take advantage of limited supplies. Ford told dealers that it wouldn’t send them F-150 Lightning pickups if they used heavy-handed tactics.

While established automakers like Ford are essentially stuck with their franchisees, startups are leaning toward direct sales. Lucid is closely following the Tesla model, but with a more boutique approach, while Rivian also has Avoid franchised dealers discount.

Polestar Space

Polestar Space

Both Rivian and Lucid were careful from the start to avoid saying that their stores or showrooms sold cars. They have been sold via website.

These direct-selling automakers have no trouble getting cars into the hands of customers, even in Michigan and other states. Tesla delivered more than 300,000 vehicles globally in the fourth quarter of 2021 alone, with some estimates of exact numbers not yet agreed.

Meanwhile Polestar’s approach is hybrid — and it could be something closer to how more and more vehicles are sold in the future. The Volvo spinoff brand has its own Polestar Spaces and online sales, but maintenance is largely handled by traditional Volvo dealers.

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