Rivian CEO, Tesla Exec Slam Restrictions On Direct-To-Customer Sales: RJ Scaringe Says It Is 'As Close As You Can Get To Corruption'

Tesla Inc. (NASDAQ:TSLA) executive Sendil Palani on Saturday termed the company’s direct-to-customer sales model as “an enormous challenge” hindered by laws of different states.

What Happened: “Tesla has been pursuing the direct-to-consumer model for two decades, and it has been an enormous challenge to pursue what we believe is the best model for customers,” Palani, Vice President of Finance at Tesla, said.

Palani was responding to comments from Rivian (NASDAQ:RIVN) CEO RJ Scaringe. Scaringe told InsideEVs that the direct-to-customer sales model is faced with several hardships.

“I think you essentially have, like, lots of dealers have paid for laws that make it really hard for us to interact directly with the consumer,” he said, remarking that it is “as close as you can get to corruption.”

Why It Matters: Certain states such as Louisiana prohibit direct-to-customer sales in an attempt to protect dealers. The laws to sell to customers without dealers as middlemen differ across states and their application, too, varies.

While Tesla’s local sales and delivery teams observe restrictions on sales activities and manage deliveries through a small number of licensed locations, company customers have to travel long distances to pick up vehicles, Palani said.

“Sadly, this is common throughout much of the country, resulting in higher costs and a worse customer experience for the affected regions,” he added.

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