Credit: Rivian

Electric vehicle maker Rivian filed a lawsuit against the Ohio Bureau of Motor Vehicles this week in an effort to force the state to lift its ban on direct-to-consumer vehicle sales. Rivian is one of a number of new EV startups since Tesla that has abandoned the dealership model for selling cars, but as things currently stand, that remains illegal in many states.

The prohibitions on direct car sales date back to the early days of the automobile and fears that the big American car companies would become too vertically integrated. But there were other benefits to the car companies—supplying cars to franchised dealers allowed them to concentrate their capital on things like production lines and factories rather than a nationwide distribution system.

That's pretty much how things stayed until the early 2010s—despite a Justice Department report in 2009 that found the laws were harmful to consumers, when a new automotive startup called Tesla decided it wanted to go another way.

In 2013, Tesla tried to use a We The People petition to get the Obama administration to change the law on direct car sales. The following year, the Federal Trade Commission agreed with the automaker and said dealership laws were harmful and anticompetitive; that same year, Tesla won the right to sell cars directly to people in Massachusetts. Efforts were less successful in Georgia, though.

In 2016, the state of Missouri was successfully sued by a collection of car dealerships after it allowed Tesla to award itself a franchise to sell cars in the state. And in 2017, Utah's courts also ruled that state regulators were allowed to prohibit car companies from owning stakes in dealerships. Continued lobbying by Tesla has expanded the number of states where it can sell its cars, although in several cases, that's through an exemption issued to Tesla, with other OEMs still prohibited from selling direct.

Scout Motors, the new SUV brand from Volkswagen Group, has also raised some hackles with its plan to sell direct. VW and Audi dealers are suing the company, claiming they should have been offered the right to sell its cars since they also sell other brands from the giant automaker. (The dealers' argument conveniently ignores the fact that those dealers don't have a right to franchises for Porsches, Lamborghinis, Bugattis, or the other brands within the VW Group empire, but don't go expecting consistency here.) A separate group of California car dealers is also suing Scout over direct car sales.

Rivian v. Ohio

In Ohio's case, the most recent affirmation against direct car sales came in 2014, with a state law that forbids issuing a license to sell cars to anyone who is "a manufacturer, or a parent company, subsidiary, or affiliated entity of a manufacturer, applying for a license to sell or lease new or used motor vehicles at retail," although it did make an exception for Tesla.

Rivian says that Ohio has no legitimate interest in preventing it from selling cars to Ohioans and that the state "allows manufacturers like Rivian to perform warranty service and other repairs on vehicles in Ohio, to rent vehicles to consumers in Ohio, and even to sell new vehicles to Ohioans from out-of-state dealerships that can be delivered to Rivian service centers in Ohio. Nonsensically, the thing that Rivian cannot do is actually complete the sale of Rivian vehicles in Ohio."

Last year, Rivian CEO and founder RJ Scaringe told journalists that the "horrific state-by-state level of rules... are as close as you can get to corruption," and that "you essentially have lots of dealers that paid for lots of laws that make it really hard for us to interact directly with the customer."

He's not wrong about the vociferous opposition to OEM direct car sales. "The direct sale model is nothing more than an effort to crush competition and suck profits out of local communities to Silicon Valley and Wall Street," the New Jersey Coalition of Automotive Retailers said.

And Rivian has faced lawsuits from dealerships in Michigan (successfully) and Illinois (unsuccessfully) in the past.