EV startups and the decision to go it alone
Lucid, a luxury EV startup that plans to compete with Tesla by focusing on increasing the range of its vehicles, currently has six direct sales locations in California and Florida, and at least 10 more slated to open in direct sales states by the end of 2021. And while the cars are still in pre-production, the regulatory patchwork of where these direct sales are allowed has already informed where the company is focusing its energies.
The more receptive the state, “the more likely we are to invest in those markets, to increase the awareness of our brand, to increase the sales,” said Daniel Witt, Lucid’s public policy lead. “It’s why we have started out in California and Florida: There aren't any encumbrances to our ability to set up shop there, and as a result we've invested heavily in early days. It is not just a coincidence that those are the two largest markets for EVs right now.”
Like Tesla before it, Lucid has chosen to forego the dealership model entirely. Witt said the company believes it is “important to have a little bit more control” over the consumer experience of purchasing an EV. Rivian, which is developing electric pickup trucks and other utility vehicles, concurs.
Because there is a learning curve associated with the adoption of any new technology, said Chen, “there are going to be questions, and so it has to be more of an education experience versus simply moving the metal.”
Furthermore, dealerships are generally such large and fast-paced operations that both Witt and Chen said it was unlikely that EV startups would be able to provide enough inventory in their first few years of operation to make the manufacturer-dealership relationship worthwhile on either side, an issue they say was at the root of Tesla’s initial break with the dealership model. (Both Witt and Chen worked together on the Tesla team pushing for state-level exemptions nearly a decade ago).
And frankly, the EV companies do not trust existing dealers to have the expertise or motivation to sell their cars.
One oft-cited 2019 Sierra Club study found that 74 percent of auto dealerships were not selling EVs, and that salespeople were not particularly informative about the technology or consumer incentives for purchasing them. The market survey included dealerships that are franchises of manufacturers that do not produce any EVs at all in their study, a point of irritation for NADA.
“At the time of the publication of that report, about half of the roughly 32,000 individual franchises that existed wouldn't possibly stock a purely electric vehicle because their auto manufacturer didn't make one,” Allen said of the study, which surveyed a representative sample of 909 dealerships in all 50 states.
A blog post from NADA Chief Executive Mike Stanton published this month took aim at the idea that dealerships are unprepared or unwilling to sell EVs, calling it a myth “propagated by the handful of companies that want to destroy the franchise system.” While there was indeed some initial uneasiness when EVs were new and unimpressive in the early aughts, he said, “the level of investment and commitment that traditional automakers have made in battery electric technology is night-and-day different than it was even five years ago.”
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