Illinois dealers to continue legal fight against direct sales by Rivian, Lucid

The Illinois Automobile Dealers Association will appeal a court decision last month that favors Rivian Automotive and Lucid Group in a fight over direct sales after the state government granted licenses to the EV startups over dealer objections.

Joe McMahon, the association's executive director, told Automotive News on Friday that the dealer group held a meeting a day earlier to discuss the judge's ruling, which sided with state officials who issued the licenses in 2021.

"We discussed it pretty extensively, and everyone feels that in this situation, the judge didn't really look at the law, and the law is pretty clear in Illinois that you can't be a manufacturer and a dealer, and you can't sell direct," McMahon said.

"We welcome Lucid and Tesla and Rivian, but they should play on the same playing field as car dealers," McMahon said. He said electric vehicle makers are getting special treatment from politicians, generally, because EVs are in vogue.

Rivian began production of its R1T pickup, R1S SUV and EDV electric delivery vans in Normal, Ill., in 2021 and employs about 5,000 people. Rivian bought the plant, which had been abandoned by Mitsubishi Motors, in 2017.

But McMahon said Illinois dealers employ 45,000 people statewide. That should be part of the debate over the franchise model in addition to the letter of the law, he says.

"When you deal in the political world, electric is shiny and new, and everyone is giving them incentives," McMahon said. But the dealer association is on the right side of the Illinois Motor Vehicle Franchise Act and Illinois Motor Vehicle Code, he added.

In the Dec. 19 ruling, Associate Judge David Atkins said the Illinois secretary of state was correct in issuing dealer licenses to Rivian and Lucid in 2021, as it previously had done for Tesla Inc.

Tesla is already the biggest luxury automaker by sales in the U.S. Rivian and Lucid are now following in Tesla's footsteps with their own direct-sales models, and other EV makers are preparing to do so, such as Fisker and VinFast.

Unlike some states that have passed legislation to explicitly ban direct sales of new vehicles, Illinois declined to do so in 2017, leaving the door open for nonfranchised sellers under current state laws and regulations, the judge ruled.

"The Illinois legislature has had ample opportunity, and has at least once expressly considered explicitly prohibiting manufacturers of automobiles from being licensed as dealers thereof," Atkins wrote in the ruling. "It has declined to do so, and it is thus reasonable to conclude that it had no such intent."

Rivian said in an email that it did not have any comment on the ruling. Lucid did not respond to a request for comment.

Tesla reached an agreement with Illinois and the dealers association in 2019 that allowed the continued operation of dealerships the automaker had established in previous years but limited them to 13, according to the ruling by Atkins.

That agreement with Tesla was a tacit acknowledgment that direct sales are legal, the judge added.

"Plaintiff IADA's argument that a manufacturer per se cannot be a dealer consistent with Illinois law, and that allowing such business would be unfair and harmful to consumers, is somewhat less persuasive in light of its own agreement to an order allowing exactly such an entity 13 dealers licenses," Atkins said in a footnote to his ruling.

But McMahon took issue with the judge's interpretation of that agreement.

The settlement with Tesla was designed to avoid future litigation between Tesla and the secretary of state, which had already issued licenses to the EV maker. After the settlement, McMahon said, no other automakers were supposed to be given direct-sales licenses. In other words, it was a one-time deal, not a new precedent, McMahon said.

Furthermore, the dealers association didn't have the opportunity to present its case in full because the judge dismissed the lawsuit before reaching oral arguments. The case is Illinois Automobile Dealers Association, et al vs. Office of the Illinois Secretary of State, et al.

"With oral arguments, we could present our case," McMahon said. "So we're going to give it another shot [with the appeal] and see what happens."