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Auto dealers, electric-vehicle startups reach compromise to allow Colorado direct-to-consumer sales

Senate Bill 167 would clarify which automakers are allowed to sell electric vehicles without a dealership, after Tesla found a loophole

The Rivian R1S will be the Michigan startup's first SUV. The vehicle is expected to be available at the end of 2020. (Provided by Rivian)
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Coloradans are one step closer to getting electric vehicles from startups like Rivian after a once-contentious bill allowing some EV manufacturers to bypass dealerships and sell directly to consumers cleared its final legislative committee on Monday.

Senate Bill 167 also marked a significant compromise by a powerful lobby that opposed a similar measure last year and almost upended the 2020 legislation: the dealerships.

“A good compromise was reached, which brought the Colorado Auto Dealers to a neutral position,” testified Mike Feeley, a CADA lobbyist and an attorney for Brownstein Hyatt Farber Schreck. “They are ready for the competition, they are ready to move this issue out into the marketplace as opposed to the legislature, and they look forward to competing vigorously in the marketplace as this market and industry evolves.”

House Speaker KC Becker, a Boulder Democrat and a prime sponsor of the measure, said the bill’s intention is to close a loophole that allows only Tesla to sell its electric cars directly to Coloradans. A representative from Tesla also spoke in support of the bill.

Senate Bill 167, dubbed by some as “the Rivian bill,” had its final legislative hearing in Colorado on March 9, 2020. The legislation would allow electric vehicle makers like Rivian to sell its automobiles directly to consumers and thus bypassing franchise dealerships. The measure passed in the House Energy & Environment committee, after passing the Senate in February. (Tamara Chuang, The Colorado Sun)

Other automakers must use dealer franchises as part of a consumer-protection law passed last decade. The dealers had initially opposed the change laid out in Senate Bill 167 because it would force automakers and the dealers they supply to compete against each other for sales.

The loophole, which a Colorado Department of Revenue official testified could still let any automaker get a license to sell vehicles in the state, makes the process confusing, said Becker, who worked with the various groups to reach a compromise.  

MORE: Electric-vehicle makers want to sell directly to Coloradans. Dealers say that’s a “solution in search of a problem.”

Tim Jackson, CEO of the Colorado Auto Dealers Association, said dealerships compete for consumers with price and service and invest in the local community. He said they often own multiple dealerships so they remain in the community if the automaker goes bankrupt. An individual automaker may not offer the same benefit. 

But CADA went neutral on the bill because the original legislation was much worse for dealers, he said. The original measure would have allowed Ford, Toyota and other legacy automakers with dealer franchises to jump into the direct-sales market to sell their electric vehicles. The compromise was an amendment that will allow only automakers that have no existing dealer franchise to sell EVs direct to consumers.

“Sometimes you just have to say, ‘Is the opposition worth the effort?’” Jackson said. 

The compromise was reached in the Senate, where, before it was amended, the measure nearly met its demise. Sen. Rhonda Fields, an Aurora Democrat, launched an impassioned plea against the original legislation, saying it would hurt communities and consumers. Then Senate President Leroy Garcia, a Pueblo Democrat, joined her in voting against the bill during preliminary debate.

It sneaked through toward final passage by one vote, thanks to the surprise support of Colorado Springs Republican Sen. Owen Hill. After the compromise was passed, it easily cleared the Senate with the support of Fields and Garcia. 

The bill, after clearing the House Energy and Environment Committee, now heads to the House floor where it’s expected to cruise toward the governor’s desk. 

More: As more electric vehicles are on the way, Colorado’s tax incentives begin to wind down

Manufacturers must still abide by consumer protection laws, such as bonding requirements to provide financial protection against damages, said Samantha Lichtin, legislative liaison and policy analyst for the Colorado Energy Office.

“Any manufacturer would still have to comply with all stipulations of Title 44 — the state bonding requirements, the state consumer protection requirements — as an existing automobile dealer within the state of Colorado,” she testified on Monday. “…The bill only clarifies and provides the option for manufacturers who do not have franchise dealers to be allowed to sell and operate their own dealerships.”

The Energy Office also supports the bill, Lichtin added.

“We see this bill at a fundamental level about consumer choice. Coloradans should have access to new, innovative vehicles coming to the market by new manufacturers,” she said. “We also need to ensure these new manufacturers have the legal certainty they need to have employees here on the ground in Colorado.”

James Chen, Rivian’s vice president of public policy, said the Michigan startup is focusing on states that are good markets for its electric SUVs and trucks. That would include Colorado, Washington and other states.  

If the bill passes, Chen said, Rivian plans to open service centers in Colorado and a showroom where consumers can stop by, kick the tires and order a vehicle. He also said that Rivian plans to invest in charging stations and its vehicles would use standard plugs just like those at “KOA campsites to a ChargePoint to Electrify America” stations.

The upcoming R1T truck and R1S SUV are expected to be available later this year or early next. The vehicles can get 300 to 400 miles of range on a single charge. 

“It absolutely means it clears the pathway for us. As you heard from earlier testimony from others say, ‘There’s uncertainty'” in the law that the bill seeks to correct, Chen said. “It’s a great example of how a number of different stakeholders with various interests are looking at this as an opportunity to serve Colorado consumers. Rivian very much wants to provide that seamless experience for Coloradans. Today’s hearing is one step closer to getting to that.”

Staff writer Jesse Paul contributed to this story.

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