By Sharon Terlep
Electric-vehicle startup Rivian Automotive just won a yearslong battle with car dealers in Washington state that threatens the model of how cars are sold.
After fighting to sell its vehicles directly to buyers, Rivian threatened to take its case to voters with a ballot measure to permit direct sales.
The dealers blinked.
The state's dealer lobby not only dropped its opposition to a sales loophole for Rivian and rival EV-maker Lucid, but also encouraged lawmakers to approve one. The measure became law this month.
"The writing was on the wall" for dealers, said Andrew Barkis, a Republican state lawmaker who in the past helped block Rivian's efforts to sell cars in the state. Once dealers got on board, however, he voted for the bill, noting that the new setup applies to only the two EV makers.
"This is the next generation of car sales," he said. Now, the same could happen in other states.
New auto entrants like Rivian, and Tesla before it, have spent years contending with long-established U.S. state laws that require new cars to be sold through independent franchised dealers.
The auto startups -- typically makers of EVs -- argue that they can offer a better experience by selling directly to consumers, much as Apple sells iPhones through its own stores and online.
Rivian CEO RJ Scaringe has said the company is committed to direct-only sales because it's more profitable and gives the company control over how its vehicles are sold, marketed and maintained.
The Washington compromise riled traditional automakers, including General Motors, Ford and Toyota, which lobbied against it, arguing it unfairly advantages startups. A trade group representing the automakers called it discriminatory and argued the exception could one day open the door to Chinese EV makers.
Following the win, Rivian executives are eyeing other states that, like Washington, ban direct sales but also allow ballot initiatives: Arkansas, Ohio, Oklahoma, Montana, Nebraska and South Dakota.
In more than a dozen states, franchise laws -- fiercely defended by dealer lobbyists -- prevent any manufacturer from selling directly to consumers. Elsewhere, a patchwork of laws limits the practice to EV startups or to specific manufacturers. After opening its first store in California nearly 20 years ago, Tesla expanded its national retail presence by exploiting various loopholes in state laws or by waging battles in court.
German automaker Volkswagen is currently facing several lawsuits from dealers over its plan to sell new Scout vehicles directly to consumers.
Dealers say independent franchises are vital to the car-buying process, creating competition between dealerships that keeps prices affordable for consumers, while providing valuable services such as repairs, warranty work and financing.
"The franchise model continues to be the ideal system for selling and servicing vehicles," Vicki Giles Fabré, the executive vice president of the Washington State Auto Dealers Association, said in a statement.
Yet for Washington's dealers, the prospect of putting franchise laws up for a popular vote laid bare a tough reality: given the choice, many car buyers want the freedom to avoid dealerships.
Rivian's polling, which the company shared with lawmakers, showed nearly 70% of respondents favored allowing direct sales when asked whether they would support manufacturers selling cars directly to consumers. Slightly fewer supported a model that singled out EV makers.
Rivian's decision to take on the risk of a ballot measure -- and nearly $5 million of expenses -- was a matter of arithmetic, said Alan Hoffman, Rivian's policy chief. The company calculated what it stood to gain through direct selling.
Those added profits dwarfed the lobbying tab, even if Rivian spent the additional $25 million it had said it was prepared to allocate, he said.
The fight comes at a critical time for Rivian, which is launching a new, more affordable SUV in a bid to make consistent profits amid a downturn in U.S. EV sales. With more mainstream pricing, Rivian is under pressure to boost its direct-sales operations.
Right now, the sales restrictions in many states make for odd dynamics in Rivian showrooms -- or, "spaces," as the carmaker calls them -- where staff can show and tout cars but not sell them.
Vehicles like the R1S SUV and R1T pickup are on display, and employees are on hand to answer questions, even help would-be owners with the registration process. Rivian is able to directly sell cars in roughly half of U.S. states, but a number of them limit how many locations the company can operate.
They can't disclose the price, though. For that, customers must go online.
Daniel Crane, a University of Michigan antitrust professor, said he believes that customers lose out when carmakers are forced to sell through dealers only.
"All these laws are bad for consumers," said Crane, who wrote a book about Tesla's success in knocking down franchise laws. "If you actually explain the issue, people from left to right say, 'Why shouldn't I have a choice?'"
The threat of a ballot initiative was a factor in dealers' decision to support the direct sales legislation, said Fabré, who represents Washington's dealer association.
She said dealers also supported it because the new law protects them by barring future automakers from selling directly in the state, while requiring Rivian and Lucid to adhere to the same regulations that govern how dealers operate. That rule means other newcomers, like VW's Scout, may have to find another way to sell directly.
Washington lawmakers from both parties said they have long felt pulled between giving consumers more car-buying freedom and protecting dealers, essentially small-business owners who are vital to local economies -- and politically powerful.
Sen. Marko Liias, a Democratic state lawmaker and a bill sponsor, said Rivian's popularity in the state convinced him a few years ago that consumers should be able to buy the vehicles there. He believed that for Rivian to be competitive, it needed the ability to sell directly.
Yet even he wasn't ready to call the dealer system obsolete.
"I wasn't trying to blow the doors wide open," he said. "We want to protect and preserve our locally run, local family business model."
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
March 28, 2026 12:00 ET (16:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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