Update: The state Senate Energy & Transportation committee approved the bill on a vote of 3 to 2 on February 18, 2020. Senate Bill 167 now heads to the full Senate for consideration.
The wave of new electric vehicles from auto manufacturers combined with new EV-friendly policies has Colorado prepping for what it hopes will be significant growth in electric vehicle sales and usage.
But an existing state law appears to be preventing new entrants such as Rivian, Fisker and others from selling their electric SUVs, trucks and vehicles in Colorado. Actually, no automaker is allowed to sell cars directly to consumers in the state, except for one, Tesla. Everyone else must use a dealership franchise.
Seeing the inequity, Sen. Chris Hansen, a Denver Democrat, introduced Senate Bill 167 to change that. The measure, scheduled for a Senate committee hearing Tuesday, would amend part of Colorado law to allow all manufacturers of electric vehicles to sell directly to customers.
“I am of the opinion that we should have that option available to any EV manufacturer,” Hansen said. “Right now, Tesla has that ability, and I don’t see any reason why there shouldn’t be market access for any other manufacturer.”
The bill is also backed by the Polis administration. Will Toor, executive director of the Colorado Energy Office, plans to testify Tuesday in support of the legislation.
“We think it’s important for a number of reasons,” Toor said. “It levels the playing field and ensures future market entrants will be able to sell in Colorado, just like Tesla.”
Last year, Rivian spoke up in support of a bill, also sponsored by Hansen and Sen. Kevin Priola, R-Henderson, that would have done nearly the same thing, but limited direct sales to only EV manufacturers. The Michigan startup, which showed off its SUV last winter in Aspen, dangled the idea that if the bill passed, Rivian would open its first store worldwide in Colorado. The legislation, however, failed.
According to James Chen, Rivian’s vice president of public policy, the company has received “substantial interest from Coloradans” for the company’s electric SUVs and pickups. It still wants to sell in Colorado and supports the bill.
“We are doing this to ensure a seamless experience for Coloradans who wish to purchase a Rivian vehicle,” Chen said.
The Colorado Automobile Dealers Association didn’t like last year’s bill. But they say the 2020 bill is even worse for dealers because it opens the direct sales route to any manufacturer who makes an EV.
Dealerships could find themselves competing directly with manufacturers, said Michael J. Dommermuth, a director at Fairfield and Woods and CADA’s outside counsel.
“This would substantially undercut the significant investments that Colorado dealers make in their dealerships and their representation of their manufacturers in the market,” Dommermuth said, adding that “this bill is a solution in search of a problem.”
Tim Jackson, CEO of the dealers association, said dealerships contribute to their local community and support customers who need service. Dealers are also independent from the manufacturer and are there to protect consumers should an automaker go bankrupt.
The existing rule preventing automakers from selling directly to consumers dates back to 2010. It was intended to protect dealerships facing the loss of their franchises after General Motors filed for bankruptcy. At the time, lawmakers grandfathered in automakers that were handling their own sales in 2009. It was intended to exempt a Lamar bus manufacturer selling directly to customers. Tesla, founded in 2003, used the law to bypass dealer franchises and is now the best-selling EV maker in Colorado and the U.S.
But Jackson said a new law isn’t necessary for companies without a franchise like Rivian because the law already allows two things: direct sales if the manufacturer has no other dealers in the state and has been in continuous operation since Jan. 1, 2009.
The wording of the law, however, could be interpreted that both are required. That ambiguity is why Hansen said he’s moving forward with the bill.
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“I am of the opinion and along with legal advice from some folks who have looked at this extensively that there is some ambiguity, and so why not clear that up?” Hansen said. “Fundamentally, I see this as a very pro-consumer bill and one that is going to create a lot of new choice and dynamism in the market. And over time, I think that increased choice and competition is going to be really good for the citizens of Colorado.”
Last August, the electric vehicle industry won the blessing of Colorado, which adopted a zero-emission vehicle mandate. By 2023, about 4.9% of an automaker’s sales in the state must be electric, with the rate increasing in ensuing years. Without the mandate, there was a concern that automakers skipped Colorado because manufacturers needed to meet EV requirements in ZEV states.
The ZEV mandate is based on California’s fuel-efficiency standards, which are different from the federal government’s. In September, the U.S. Environmental Protection Agency revoked the unique authority California has had since 1966, which makes it older than the EPA. California’s attorney general fought back with a lawsuit and was joined by 23 other AGs, including Colorado’s.
Despite not being a ZEV state, Colorado saw electric vehicle sales grow last year, and the state jumped up one spot to the fourth place nationwide based on the rate of EV sales compared to all sales, according to the Alliance of Automobile Manufacturers.
Electric vehicle sales continue to grow annually, though they are still just a small portion of overall automobile sales. According to market researcher IHS Markit, gasoline cars made up 93% of car sales last year. But IHS projects that will shrink to 72% in 2025 and to 62% by 2030.
By comparison, the electric vehicles category — which excludes plug-in hybrids and hybrids — will see their 2% of the 2019 market increase to 8% in 2025 and 11% by 2030.
The market just isn’t growing as fast as many would like because of “headwinds,” said Devin Lindsay, principal analyst for IHS Markit. That includes potential legislation in favor of EVs, low fuel prices, consumer acceptance, EV battery life and spotty charging infrastructure.
“When I look at all of those other factors, I’m not surprised that we’ve only seen a relatively slow increase thus far in the market,” Lindsay said. “Generally, we’ve seen this push begin to happen where consumers seem to be leaving passenger cars and going to more crossovers and SUVs and pickup trucks. And you don’t really have too many EV products in the various segments that consumers seem to be shopping right now.”
But many are on their way. By the end of 2020, two heavily anticipated electric SUVs will hit the market: Ford’s Mustang Mach-E and Rivian’s R1S. The following year, California-based Fisker plans to sell its Ocean SUV, which starts at $37,500.
“America is the country of innovation and creativity. And I think we have entered into a whole new era of customer experience that evolved out of a smartphone,” said Henrik Fisker, founder and CEO of the company. “Laws and regulations mostly have been put in place before certain discoveries happened. … If there’s a desire for mass adoption of electric vehicles, which obviously is good for the environment, I don’t think we should try and stop them.”
The fully-digital company will have no dealerships and will do everything through its mobile app — including service and repair reservations (a local service company would pick it up and bring it back).
“However,” Fisker added, “if those laws are not changed, all of us are extremely innovative and we will find other ways to get cars to people and people will find ways to get their cars.”