Direct Sale Of Electric Vehicles Continues To Follow Tortured Path With Recent Legislative Developments

The battle continues in state legislatures between electric vehicle (EV) manufacturers who want to sell direct to consumers and interest groups representing dealers and technicians who sell and service traditional internal combustion engine (ICE) vehicles. Over the past decade, a patchwork of state laws have emerged, with some states allowing all EV manufacturers to sell and service vehicles directly; some states allowing only Tesla to sell and service vehicles directly; and other states altogether prohibiting EV manufacturers from the direct sale and service of those vehicles. While EV manufacturers have made some gains, the pace of legislative change has slowed recently, with OEMs nibbling at the margins in states that already permit direct sales rather than breaking open new states for direct EV sales.

New Direct Sale Markets

In June 2021, Vermont adopted Act No. 63 and amended that state’s dealer statute to allow “non-franchised zero-emission vehicle manufacturers”—i.e., OEMs who make only zero-emission vehicles and have never sold or leased vehicles through a dealer—to sell, lease, and service EVs in that state. This action followed recommendations from a study by the Vermont Agency of Transportation commissioned by the Legislature in June 2020. This action also followed the lead of states like Colorado, which in March 2020 amended its state dealer statute to allow EV manufacturers with no pre-existing dealers to sell direct to consumers.

More recently, however, EV manufacturers have faced continued headwinds. In Connecticut, for example, S.B. 214 would have permitted EV manufacturers to operate sales and service locations in that state. The bill managed to get through a committee vote with a 21-14 favorable recommendation in late March 2022, but in the face of significant resistance from dealers and labor unions representing vehicles technicians, was never brought to a vote before lawmakers adjourned the current session.  Likewise, S.B. 398 in Georgia would have amended the state’s dealer statute—which currently permits only Tesla to operate five in-state locations—to allow EV manufacturers to engage in direct sale and service of vehicles.  That legislation also failed to garner enough support to be brought to a vote.

Nibbling At The Margins

With few exceptions, recent legislative change in this area has tended to be more modest.  In Utah this past March, the Legislature passed and the Governor approved S.B. 204, making minor conforming changes to existing law—which already permitted EV manufacturers to sell directly to consumers in that state—and also allowing “low-volume manufacturers” who make fewer than 325 vehicles a year to sell direct. Indiana, likewise in March, enacted H.B. 1167 to make minor changes to that state’s dealer law to add an exemption permitting manufacturers to sell direct to the federal government, charitable organizations, and the manufacturer’s employees.  With that limited exception, the bill confirmed Indiana’s ban on the direct sale of vehicles to consumers unless the manufacturer (1) had a license to sell new motor vehicles before July 1, 2015 and (2)  established a warranty repair service center before January 1, 2018, i.e. Tesla.

While there has been a significant push on the national level to promote the widespread adoption of EVs, including President Biden’s August 5, 2021 Executive Order targeting a 50% EV sales share in the United States by 2030, the patchwork of state dealer laws and the reluctance of legislators to make sweeping changes to those laws will likely continue to hinder EV distribution, at least on a direct to consumer basis.