One of the landmarks of Colorado’s market today is the vast number of options available to consumers when they wish to purchase a product.
If one wants to acquire something, there’s almost a guarantee that there are several ways to do it. This is true for nearly anything, from mobile phones to real estate.
In the internet age, information is king, and consumers no longer rely on a single medium to buy products. A brief look at forums online will prove that people are prone to researching hard before they purchase something substantial.
It is not rare to find manufacturers such as Apple or third-party suppliers doing business directly with their consumer base. This just makes perfect sense.
That is, of course, unless one is buying a brand new car.
Cars are high ticket items, widely considered as one’s second-biggest purchase after a home. With so much at stake for consumers, one would be inclined to think that consumers actually have a lot of choices when it comes to how they wish to buy a vehicle.
Unfortunately, that is not the case. In Colorado, if you want to buy a car, you’d need to go through a dealership, period.
The dealership model for auto sales has been around for a while. In the U.S., the practice has been going on for nearly a century.
Apart from Tesla, which was fortunate enough to get permission to sell its cars directly to consumers in the state, it is impossible to get a vehicle without going through a dealer. There is, however, one problem.
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Auto dealerships are notoriously unpopular among consumers. There is a reason why auto publications publish consumer guides outlining how to deal with car dealerships regularly.
Directly speaking, the practices associated with car dealerships are heavily skewed toward the negative, and they have been for a very long time. Stories of pushy car sales staff, variable prices for the same car and outright rip-offs are common. So common, in fact, that they inspire countless memes and posts online.
Here lies a fundamental problem. Dealerships are designed to make as much money as they can from consumers. That’s just the way the business functions.
Representatives from the Colorado Automotive Dealer Association (CADA) can sugarcoat it with statements about their concern for consumers all they want, but dealers put their own interests in mind before they consider their customers.
This is a key reason why their lobbying efforts have been focused on blocking automakers from selling directly to the public in Colorado.
They simply don’t want the competition, and they have leveraged Colorado’s franchise dealer laws to limit free market and consumer choice.
A law exists in Colorado that prevents an auto manufacturer from selling its vehicles directly to consumers. Thanks to the efforts of CADA, this law has made it very difficult for newcomers such as Rivian and Lucid Motors to make an initial investment in the state.
Rivian actually wishes to establish one of its first stores in Colorado since the state and its consumers are a perfect fit for the company’s rugged, tough, and long-range electric vehicles.
But thanks in no small part to lobbying from CADA, Rivian’s efforts failed in 2019. Rivian intends to start the production of its R1T pickup truck later this year, and it will be pretty ironic to see the electric car maker not being able to operate a store in a state that’s tailor-fit for its trucks.
Inasmuch as CADA and its lobbying efforts have proved effective thus far, things seem poised to change in 2020. Sen. Chris Hansen, D-Denver, has introduced Senate Bill 167 to amend a part of Colorado law. Through this amendment, automakers selling electric vehicles will be allowed to sell directly to consumers.
Speaking about the amendment, Hansen stated that he was “of the opinion that we (consumers) should have that option available to any E.V. manufacturer.” Truer words have not been spoken about the issue.
Unsurprisingly, CADA lobbied senators to modify the original bill, which initially allowed for even traditional manufacturers to sell electric vehicles directly to consumers. As it stands now, the bill will only apply to manufacturers who do not have existing franchise agreements.
That was after CADA’s President Tim Jackson said they were not enamored with the bill in a Feb. 24 Automotive News article. He criticized the bill that would give consumers more buying options by saying, “You can’t put lipstick on a pig. It’s still a pig.”
Calling a bill that allows consumers the option to choose whether they want a dealership or direct-to-manufacturer experience “lipstick on a pig” is disheartening to say the least.
If the dealer model is so wonderful as Tim waxes so often, he should have no concern removing the protective veil that insulates them — a veil that, quite frankly, is anti-competitive.
In fact, if the dealership model is so superior to what a manufacturer can provide, competition will only bolster the value they say they provide to car buyers.
SB-167 passed the Colorado state Senate 22-12 on Feb. 28. The bill will now be up for a vote in the House, and if it passes, it could provide a clear pathway for companies like Rivian to sell electric vehicles directly to consumers.
During the Air Quality Control Commission hearing in May of 2019, Tim stated that “consumers and customers rule.” He also emphasized that “they will not be bullied, they will not be compromised or misled.”
Well, Colorado car buyers are now demanding free market and consumer choice, and that includes giving a chance to automakers to enter the market with a business model they believe in.
It’s worked for Tesla, and there’s little reason to believe it won’t work for Rivian or any other automaker that is looking to Colorado for business.
If you support consumer choice, please reach out to your House representative to tell them to support SB-167.
Sean Mitchell is a real estate agent in the Denver area. In his spare time he heads up the Denver Tesla Club and advocates for electric vehicle owners along the Front Range.