EVs and Consumer Choice

Electric Vehicles and Consumer Choice:
A Critical Policy Opportunity for Expanding EV Adoption

Direct-to-consumer automotive sales, also known as “direct sales” or consumer access, are an often overlooked opportunity that would drastically improve consumer choice and accelerate electric vehicle (EV) adoption while also providing tangible benefits to consumers and the entire EV supply chain. Unfortunately, the ability for consumers to purchase a vehicle directly from EV manufacturers is restricted in many states, limiting the ability to sell more vehicles to consumers by forcing them to go through a middle man (auto dealerships), and ultimately hurting EV adoption. Enabling consumers to purchase from the manufacturers will help expand the market and bring us one step closer to ending US dependence on foreign oil. and realizing the economic, health, and climate benefits of transportation electrification.

Electric Vehicles and Dealer Networks

The ability for a manufacturer to sell products and services to a consumer is a unique and pressing issue that is critical to achieving mass adoption of EVs for the light-, medium- and heavy-duty vehicle sectors.   Requiring vehicle manufacturers to sell through franchised dealerships marks the US as a global anomaly. European, Chinese, Canadian, and Australian markets all allow for vehicles to be sold through a variety of sales channels, including through direct-to-consumer models and through franchise dealerships. 

However, in most of the US, vehicle manufacturers are legally required to sell vehicles to customers through franchised dealerships. This poses several challenges and problems for the sale of EVs. First, the business model of the EV-only manufacturers does not lend itself to the dealership model, as EV manufacturers do not have the sheer volume of product available to stock dealer lots, since as soon as an EV is manufactured it is usually shipped right to the customer. EVs are growing in popularity and are not sitting idly by on dealer lots. Current EV manufacturing and supply chains are not able to produce at volumes needed to stock lots. Adhering to the business model of the franchise dealerships is limiting to the nascent EV industry.

The business model that works for the EV-only manufacturers is the  direct-to-consumer business model. By selling directly to consumers, EV-only manufacturers save money from not building out a nationwide dealership network and producing enough inventory to stock lots with idle vehicles. This model enables EV-only manufacturers to sell and deliver their vehicles as they are manufactured, while reinvesting any savings back into scaling new technologies and manufacturing to bring new products and savings to their consumers.  

EVs are also not well suited for the dealership model as they are now. There is a lot more information to convey for EVs during the sale process; questions on things like range, how and where to charge, and available incentives. Learning these details and answering questions for each potential new buyer costs dealers time. Additionally, EVs require significantly less maintenance than internal combustion vehicles, while revenue from service and maintenance can be half of a dealers revenue. By not allowing for innovation with the direct sales business model, policymakers are sentencing the employees of franchise dealership model to a slow decline.  

Consumer Choice is Critical to Accelerating EV Adoption

In over half of the country, people who want to purchase EVs have artificially limited consumer choice. Only 21 states allow the direct sale of EVs to customers. The other 29 states either limit direct sales to a single manufacturer or are closed to direct sales completely.

The ability for a manufacturer to sell products and services to a consumer is a unique and pressing issue that is critical to achieving mass adoption of EVs for the light-, medium- and heavy-duty vehicle sectors.   Requiring vehicle manufacturers to sell through franchised dealerships marks the US as a global anomaly. European, Chinese, Canadian, and Australian markets all allow for vehicles to be sold through a variety of sales channels, including through direct-to-consumer models and through franchise dealerships. 

The ability to sell directly to the consumer is a strong indicator of EV sales.   In 2020, America’s approximately 17,000 dealerships sold 45,000 EVs, or less than three EVs per dealership. Compounding the low average number of EVs sold, over 70% of dealerships do not have an EV on their lot for sale according to a 2019 study. If transportation electrification goals are to be reached, then direct sales are a critical part of that mission. Even states with a demonstrated commitment to electrification can be hamstrung by a lack of direct sales. Despite New York and Florida having similar populations and despite the former being a ZEV state, Florida sold 80% more EVs than New York in 2020.

Open and Competitive Markets are a Win for Consumers and Dealers

On top of its impact on the number of EVs sold, direct sales can also open the door to greater consumer choice and better customer experience. 93 percent of customers polled stated that a test drive is either very or somewhat important when considering the purchase of an electric vehicle. In the 28 states that prohibit or limit direct sales, consumers with an interest in purchasing an EV are being denied the full car purchasing experience. Still, direct sales are not just a matter of consumer satisfaction. Competition in the market would spur manufacturers to innovate and keep prices competitive. Furthermore, direct sales would introduce a wider variety of EVs to the market thereby granting customers greater consumer choice.

Direct sales do not exclusively benefit consumers and EV-only manufacturers. According to data from the National Automobile Dealers Association, franchise dealers perform better in states that are open to direct sales. In states that were open to at least one EV manufacturer, franchise dealerships saw their sales revenue increase 58% between 2012 and 2019. During the same period, states closed to direct sales only saw a 29% increase in sales revenue. Dealership employment saw a similar trend- with open states seeing a 21% increase in employment while closed states only had a 12% increase in employment. Contrary to what has been portrayed, franchise dealerships in direct sales states are benefitting from additional market competition, not seeing their business model undercut.

Electrifying the US transportation sector is a crucial step in eliminating dependence on foreign oil. Increasing the number of states with direct sales is both a low-cost, and an invaluable policy lever to accelerate the adoption of EVs. Enabling direct sales would provide proven economic benefit, allowing the market to respond to the wants and needs of the consumer.

Amy Malaki

Amy Malaki is the Director of Partnerships and Policy at SkyNRG and SkyNRG Americas, pioneering global leaders in sustainable aviation fuel production and supply. Prior to SkyNRG, Amy was the Associate Director for the transportation portfolio at the ClimateWorks Foundation where she developed philanthropic investment strategies to advance a sustainable, equitable and low-carbon mobility system. She also pioneered the organization’s international aviation decarbonization strategy. Prior to that she focused on Asia business development at Better Place, a Silicon Valley electric vehicle network startup. She has a B.A. in Chinese and China studies from the University of Washington and an M.A. in international policy studies (energy and environment) from Stanford University.