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Illinois auto dealers file appeal after judge dismissed lawsuit challenging direct-to-consumer EV sales

Robert Channick, Chicago Tribune on

Published in Automotive News

The Illinois Automobile Dealers Association has appealed a December court ruling that allowed EV automakers Rivian and Lucid to continue cutting out the middleman and selling directly to consumers.

The appeal, filed Friday in Chicago, challenges that decision and to a large extent, the evolving EV sales model nationwide.

“We think the law is pretty clear: You can’t be a manufacturer and a dealer,” said Joe McMahon, executive director of the Illinois Automobile Dealers Association. “The Illinois Vehicle Code basically states that you have to go through franchised dealers.”

Henry Haupt, a spokesman for the secretary of state’s office, which licenses auto dealers in Illinois, declined to comment on the appeal.

In December, a Cook County judge dismissed a 2021 lawsuit brought by the dealers against the startup EV manufacturers for allegedly violating Illinois vehicle franchise requirements. The court ruled the state was correct in issuing dealer licenses to Rivian and Lucid, as it had previously done with Tesla.

The association, which represents more than 700 auto dealers operating 2,300 franchises across the state, cited the Illinois Vehicle Code and the Illinois Motor Vehicle Franchise Act as mandating that all vehicle sales to the public “must be made through licensed and independent franchised” dealers, an argument it is renewing in the appeal.

 

Leslie Hayward, head of policy communications for Rivian, declined to comment, while Lucid Motors did not respond to a request for comment on the appeal.

Tesla, the leading EV manufacturer, pioneered the direct-to-consumer sales model after the introduction of its Model S in 2012. McMahon claims Tesla was licensed to open dealerships in Illinois in 2017 as part of a one-time agreement with the secretary of state to avoid litigation.

The auto dealers, the secretary of state and Tesla entered into an administrative consent order in 2019 agreeing that Tesla could have no more than 13 dealer licenses in Illinois.

In 2020, the Illinois attorney general’s office issued “an informal opinion” stating that the motor vehicle law does not expressly require new manufacturers to establish franchise dealerships to sell their vehicles, opening the door for Rivian and Lucid to launch their own direct-to-consumer sales networks, according to the dealers’ lawsuit.

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