Can Rivian Succeed with a Direct-to-Consumer Vehicle Sales Model?

Automotive News is reporting today (subscription required) that Rivian, the electric truck and SUV startup, will utilize a subscription service as the retail model to consumers. Other automakers (mostly luxury auto brands) have tried subscription retail models recently with varied levels of success. According to RJ Scaringe, Rivian’s CEO, the company will not utilize a traditional franchised dealer network for their vehicle subscription service. Beginning early this year, Rivian received investments of $700 million, $500 million, and $350 million from Amazon, Ford Motor Co. and Cox Automotive respectively (Amazon led the $700 million investment). For Scaringe to publicly announce a plan that does not include franchised dealers for retail, these corporate investors must be comfortable with Rivian’s direct-to-consumer plan. Factory direct sales are very controversial in the automotive space particularly with franchised auto dealers. Yet unlike Tesla’s direct-to-consumer retail model, Rivian might use auto dealers for back-end and after-sales business. In fact, Scaringe hinted that Rivian will have “partners to run and maintain the back-end ecosystem.” If so, this is a very different back-end and retail model than Tesla which does not use a subscription model and manages their own back-end business, including vehicle service.