James Chen, Rivian's VP of public policy spoke with Business Insider about how the company is lobbying US lawmakers to change dealership laws.

In the 2000s, Tesla broke away from one of the automotive industry's longstanding practices: Instead of relying on third-party dealerships to sell its vehicles, it would own and operate its own stores.

That strategy came with a major roadblock: Many states have laws that require automakers to work with dealerships. The list includes some of the most populous states in the US, like Texas and New York. Tesla spent years lobbying to change those laws, winning in a few cases and receiving a handful of special exemptions.

Now, a new generation of electric-vehicle startups is joining the fight to keep the all-important sales process in-house.

James Chen, the vice president of public policy at Rivian, told Insider that controlling its retail network will allow the company to have a closer relationship with its customers. With a direct-sales model, Rivian can remotely monitor a vehicle's condition, diagnose problems, and send a service team to fix them — something the company wouldn't be able to do if it sold its vehicles to a dealership. "We believe ultimately it's a better experience if the consumer is able to have that direct touch with the manufacturer," Chen said.

Customers who live in states that don't allow auto manufacturers to own stores will still be able to buy one of Rivian's vehicles, Chen said. They'll have the choice of picking up the vehicle in another state or having a Rivian employee deliver it to them.

The National Automobile Dealers Association argues that laws requiring auto manufacturers to sell through third parties, known as dealer-franchise laws, "level the playing field between large automakers and small local dealers." In 2020, 94% of US automotive dealers owned between one and five locations, according to NADA. Just 2% owned more than 10.

Chen noted that companies in other industries, like dining, lodging, and consumer electronics, aren't bound by similar restrictions. From his perspective, the decision to offer car dealerships a special kind of protection is arbitrary.

The argument Chen makes to lawmakers is that dealer-franchise laws are slowing the adoption of EVs, and that allowing companies like Rivian to own stores won't suddenly force local dealerships out of business. "Legislators are often receptive to hearing that," Chen said.

Rivian and its peers have successfully lobbied for an exemption in Colorado and made progress in Vermont, but there are still 20 states that don't allow direct sales from any manufacturer, and eight that have made exceptions only for Tesla. Chen said Rivian's policy team is now focused on regions that could be lucrative markets for Rivian's R1T pickup truck and R1S SUV, like the Southeast, Northeast, and Northwest.

While Chen thinks the US will continue to gradually become more open to auto companies bypassing dealerships, he doesn't expect full acceptance anytime soon. "I think we'll have this battle for a while," he said.