Colorado Adopts Two-Tier System For Direct Sale Of Electric Vehicles By Manufacturers

On March 23, 2020, Colorado Governor Jared Polis signed into law S.B. 20-167, which amends that state’s dealer statute to allow some electric vehicle manufacturers to own, operate, and control motor vehicle dealerships in Colorado.  This law follows other recent actions taken to move Colorado to an electric vehicle future (and decrease dependence on vehicles with internal combustion engines), such as awarding grants to install new EV charging stations, providing tax credits for EV purchases, and establishing a zero emission vehicle mandate.

Prior to the bill’s enactment, which becomes effective on August 5, 2020, Tesla had operated one dealership in Colorado but there was uncertainty as to whether other electric vehicle manufacturers, like new market entrant Rivian, could own and operate dealerships.  S.B. 20-167 eliminates that uncertainty by adding an exception to Colo. Rev. Stat. § 44-20-126 (which prohibits manufacturers from owning motor vehicle dealers) providing that a manufacturer that makes “only electric vehicles and has no franchised dealers of the same line-make in this state” may own, operate or control one or more motor vehicle dealers.  While some versions of the bill would have allowed all electric vehicle manufacturers -- including those manufacturers who make both electric vehicles and internal combustion engine vehicles -- to own dealerships, the bill presented to Governor Polis was stripped down to only allow manufacturers that focus exclusively on electric vehicles and do not already have franchised dealers sell direct to Colorado consumers.

S.B. 20-167 will allow Rivian, Tesla, and other new market entrants to sell direct to consumers, but the Colorado dealer statute will continue to prohibit established vehicle manufacturers -- even those manufacturers trying to bring new electric vehicle products to market -- from doing so.  This two-tiered distribution system in Colorado may place established vehicle manufacturers at a disadvantage as they try to compete with new entrants to sell electric vehicles to consumers.  Whether this two-tiered system is rationally related to the stated intent of S.B. 20-167 to “increase[e] consumer access to electric motor vehicles” -- and whether it can survive constitutional scrutiny if challenged by established vehicle manufacturers -- remains to be seen.