Rivian, Lucid Motors, and Scout Motors say state dealership-franchise laws across much of the US are blocking their ability to sell vehicles directly to consumers, forcing a state-by-state legal fight that EV makers argue is choking a sales channel central to their business model.
Speaking with Business Insider, executives from Rivian, Lucid Motors, and Scout Motors said the state-by-state system governing vehicle sales creates a stifling retail experience for both employees and prospective buyers.
The laws, largely written decades ago to regulate the relationship between traditional automakers and their franchised dealers, are being applied to EV startups that never had franchise networks in the first place, the companies argued.
The National Automobile Dealers Association, in contrast, told the outlet that the legislation serves a purpose.
“Franchise laws protect consumers as well as dealers — that’s why they’ve been part of the fabric of America for many years,” a spokeswoman said. “When dealers compete, prices go down, and customers win.”
Rivian
Rivian‘s Director of State Public Policy Beau Whiteman pointed to Ohio as one of the most difficult markets for the EV maker.
The EV maker filed a lawsuit against the Ohio Bureau of Motor Vehicles last August, challenging the state’s restrictions on direct-to-consumer sales.
Rivian cannot obtain a dealer license in the state, although it can operate service facilities to fulfill warranty obligations.
Prospective customers who walk into one of those service centers can ask basic questions about the vehicles; however, employees are unable to discuss pricing, financing, or purchasing, and cannot offer a test drive.
“If you’re an Ohio resident and want to drive one of our cars, we cannot offer that to you,” Whiteman said.
To purchase a Rivian in Ohio, customers must complete the transaction online. The other option is to travel to other states, such as Illinois, where customers are able to process the purchase as the company holds a dealer license there.
The second option requires the customer to pay for a temporary Illinois tag and complete power-of-attorney forms before Rivian submits paperwork to the Ohio DMV.
The Ohio Automobile Dealers Association disputed Rivian‘s account, telling Business Insider that state law allows the company’s vehicles to be sold through an independent dealer of its choice.
Rivian has been stepping up its push to eliminate restrictions across the country.
Earlier this year, the company backed Iowa Senate Study Bill 3067, saying it would allow Iowa residents “the freedom to purchase electric vehicles directly from the manufacturer.”
There, and according to the EV maker, customers must also travel to Missouri, Illinois, or Minnesota to test-drive its vehicles and discuss pricing.
Rivian had also pledged to invest $4.6 million in a public initiative to overturn the direct-sales ban in Washington state, through the Washington Coalition for Consumer Choice and Innovation.
In March, Washington enacted Senate Bill 6354, extending direct-sales privileges to Rivian and Lucid — a right previously held only by Tesla since 2014.
Governor Bob Ferguson signed the bill after it passed 47-2 in the Senate and 84-9 in the House.
Illinois also granted dealer licenses to both Rivian and Lucid following a 2022 court ruling.
Lucid
Lucid Motors‘ Head of Public Policy Daniel Witt also told Business Insider that the restrictions create “awkward” customer interactions and legal risks for retail employees.
Workers need to know which questions they can answer and which topics are off-limits, as a routine sales conversation can turn into a compliance issue.
“You’re dealing with retail employees. They’re not legal experts, but they have all these red lines that they have to consider,” Witt said, noting that workers are put on the “front lines for compliance.”
In states where Tesla has won the ability to sell directly — such as Michigan — Lucid can partly benefit.
The settlement Tesla reached with Michigan allows other EV makers to discuss prices, offer test drives, and provide warranty service, but they cannot complete the final sale or title the vehicle.
Witt said this arrangement can still create financial burdens for buyers due to separate handling of taxes and registration costs.
Lucid is currently cleared for direct sales in fewer than half the states in the US, despite legal wins such as Washington.
Scout Motors
Scout Motors — relaunched in 2022 as a Volkswagen Group subsidiary — presents perhaps the starkest example of the disconnect between manufacturing investment and sales access.
The company has invested more than $2 billion into its production campus in Blythewood, South Carolina — a figure that has since risen to $3 billion, 50% more than Volkswagen originally budgeted.
The facility is expected to create over 4,000 permanent jobs. But South Carolina law prevents Scout from selling directly to consumers in the state.
Cody Thacker, Scout Motors‘ VP of Commercial Operations, called the situation “tragic.”
“We are in this position where we have to tell the people who build Scout vehicles that they have to drive to Tennessee to buy the product that they make,” he stated.
Scout does not expect to begin customer deliveries until 2028, but dealership laws are already shaping its business planning.
The company has spent years exploring different business models before committing to direct sales, and now must plan its retail footprint in accordance with each state’s rules.
Colorado became the first state to formally approve Scout‘s direct-sales application in late 2025, after the state’s Motor Vehicle Dealer Board ruled that Scout is not the same-line manufacturer as Volkswagen.
However, the brand is facing lawsuits in California and Florida from other VW Group brands and dealer associations — which argue that its direct-sales approach violates state franchise laws.
Thacker framed the issue in competitive terms.
“The United States market and the auto industry specifically does not exist in a vacuum, and this is a point in time where the winners and losers for the next hundred years are being selected,” he told Business Insider.
Tesla Leading the Way
The three companies are part of a wider push by EV manufacturers to dismantle or reform dealership-franchise laws.
Tesla, which pioneered the direct-to-consumer model in the industry, remains unable to sell directly in 14 US states — including Alabama, Arkansas, Iowa, Louisiana, Nebraska, North Dakota, South Carolina, and Texas.
The company sued North Dakota after the state rejected its applications to open showrooms in Bismarck and Fargo — a case that has since advanced to judicial review.
At least 18 states have passed laws allowing some form of direct-to-consumer sales, though most come with restrictions.
Some, like Utah, limit the model to manufacturers that exclusively sell zero-emission vehicles.
Others, including Georgia and North Carolina, cap the number of stores a manufacturer can operate.
European Business
The direct-sales debate in the United States contrasts sharply with the approach EV startups have taken in Europe, where franchise-dealership laws of the American kind do not exist — but where other challenges have emerged.
Lucid entered Europe in late 2022 with a Tesla-style direct-to-consumer approach, opening company-owned studios in Oslo, Amsterdam, Munich, Düsseldorf, Frankfurt, Geneva, and Zurich.
However, the strategy has yielded disappointing results.
The company sold just 319 vehicles across its four European markets in 2025, a 32% decline from 470 units the year before.
Lucid has shifted to a hybrid business model that combines its existing showrooms with local dealership partnerships.
The company signed German dealer group Wackenhut as its first European retail partner earlier this year, as exclusively reported by EV.
Interim CEO Marc Winterhoff said the company was “in advanced discussions with more than 10” additional dealer groups across Europe.
Lucid plans to expand from four to as many as 12 European markets by the end of 2026, with new entries relying exclusively on local dealer partnerships.
Rivian, meanwhile, has signaled plans to enter Europe with its upcoming R2 SUV, using the same direct-to-consumer model it operates in the US.
CEO RJ Scaringe said last year that the company intended to build out sales, service, and distribution infrastructure on the continent, positioning Rivian as “highly aspirational but highly attainable.”
However, the company has since quietly delayed the European launch, removing a previously stated 2027 target from its website without specifying a new timeline.
It currently operates a service center in Düsseldorf and a parts distribution center in the Netherlands, both tied to its Amazon delivery van partnership.
Scout Motors, as a subsidiary of the Volkswagen Group, would likely benefit from VW’s established European dealer network should it eventually expand to the continent — though no such plans have been announced.
Its immediate focus remains on navigating state-level restrictions in the US ahead of its first customer deliveries in 2028.
The stakes are growing as the industry enters a period of rapid expansion, with new models from Rivian and Lucid, and the Scout launch, approaching.
Rivian is ramping production of its R2 SUV at its Illinois plant, with customer deliveries expected within the upcoming weeks, while Lucid is preparing to begin production of its mid-size EV model Cosmos in Saudi Arabia by year-end.
