Tesla loses Washington loophole as Rivian, Lucid score direct deals

March 16, 2026

A loophole benefiting the carmaker Tesla will soon end in Washington state after a compromise between other electric car manufacturers and local auto dealers.

And it only took Tesla founder Elon Musk growing really unpopular with liberal car buyers, and Rivian threatening a Washington ballot measure.

The backstory: In 2014, when Tesla was the main name in the electric car game, the company secured a key loophole in Washington law. Normally, carmakers in Washington have to sell through locally owned dealerships, but not Tesla. They were allowed to sell directly to consumers.

As other electric-only carmakers like Rivian and Lucid grew popular, they could open showrooms in Seattle, but anyone coming in for a “demo drive” couldn’t discuss financing or buy a car and drive it off the lot. Instead, they had to buy online or go to Oregon.

“Washingtonians have been — by their behavior, by their voting with their pocketbooks — voting with their feet, purchasing these [Rivian and Lucid] vehicles and bringing them here,” said state Sen. Marko Liias, a Democrat representing Edmonds and Mukilteo. “Certainly, Rivian in Washington has a lot of popularity. I see them every day that I drive around.”

Liias’ Senate Bill 6354, which passed the state Legislature last week, opens up that loophole to Rivian and Lucid. Republican Sen. Curtis King of Yakima co-sponsored the bill.

Last year’s efforts to end Tesla’s quasi-monopoly in the wake of Elon Musk’s salute at President Donald Trump’s inauguration celebration and his work with the administration failed, in part because of lobbying from locally owned car dealerships.

What changed?

Rivian announced it would spend millions to ask voters to weigh in this fall with a ballot measure that could have swatted local car dealerships out of the car-buying process entirely.

“The way that the initiative was drafted, it would’ve allowed direct sales sort of broadly, not just for Rivian and for Lucid,” Liias said. “ When I talk to auto dealers, what they’re most concerned about is that the manufacturers that they work with already and that they’ve made these long-term financial commitments to will try and go outside of that dealer relationship and just start direct selling and undercutting their own dealers.”

So, they came to the table and worked out a compromise. It allows any company that only manufactures electric cars with 300 vehicles registered in Washington before Jan. 1, 2026 – which other than Tesla only includes Rivian and Lucid, Liias said – to sell at their own dealerships, and no one else.

“Our local dealers are small businesses or family-owned businesses, depending – some of them have a chain,” Liias said. “Moving away from that model to have the big three from Detroit just selling directly and avoiding the relationships with these local businesses did seem like something that we should be more thoughtful about.”

Representatives for Honda, Ford, and General Motors opposed the bill in hearings. Craig Orlan, a lobbyist with Honda, said there’s nothing stopping Lucid or Rivian from selling at local Washington dealerships.

“They want to bypass the systems in order to gain a huge competitive advantage,” Orlan said at a House hearing on March 5. “This legislation would not create a level playing field. It would, in fact, create two sets of rules for the same industry.”

The bill is waiting for Gov. Bob Ferguson’s signature; a spokesperson for the governor said he likely wouldn’t get to it this week.

The bill would go into effect in about 90 days.

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