Lucid, Rivian Sued In Illinois Over Direct Sales Model

A lawsuit has been filed against electric vehicle startups Rivian Automotive and Lucid Motors in Illinois for selling vehicles directly to consumers in the state.

What Happened: The lawsuit was filed by the Illinois Automobile Dealers Association, the Chicago Automobile Trade Association, and other plaintiffs including individual franchised auto dealers in the state.

The plaintiffs allege that Amazon.com Inc. AMZN-backed electric truck startup Rivian, California-based EV startup Lucid Motors and the state of Illinois are violating state laws that require new vehicles to be sold through franchised dealers. It accuses the Secretary of State’s office of “turning a blind eye to Rivian’s unlicensed sales operations” in violation of state law.

Lucid Motors plans to go public via a SPAC merger with blank-check company Churchill Capital Corp. IV CCIV. The company is on track to deliver its Air luxury vehicle later this year and is focusing on a direct-to-consumer model by opening new showrooms called “Lucid Studios.” Lucid plans to open a showroom in Oak Brook, Illinois, in the second quarter of 2021.

Rivian has said it plans to begin delivering its R1T electric pickup truck in June and its R1S electric SUV in August this year. The company manufactures its flagship EVs at its plant in Normal, Illinois. The company is constructing a showroom in Chicago.

See Also: Lucid Says The High-End Version Of Its Air Sedan Is Already Sold Out

Why It Matters: Illinois auto dealers have previously too expressed their concern over direct sales and challenged Tesla Inc. TSLA for its direct-to-consumer sales model. In May 2019, the auto dealers, the Secretary of State and Tesla entered into an administrative consent order agreeing that Tesla could have no more than 13 dealer licenses in Illinois, as per the lawsuit.

Nevertheless, other automakers are increasingly following Tesla’s lead by adopting the direct sales model. It was reported in February that Lordstown Motors Corp. RIDE is looking to sell its trucks directly to customers in Ohio.

Ohio allowed Tesla to make direct sales to its customers in 2014. At the time, the Ohio dealer’s association had tried to block the Elon Musk-led company from selling directly. Tesla has a similar arrangement in Michigan as well.

See also: How to Buy Lucid Motors IPO Stock

Price Action: Churchill Capital shares closed about 7.3% lower on Monday at $21.35.

Read Next: Tesla Rival Rivian To Install Over 3,500 Fast EV Chargers And Another 10,000 Open To Public By 2023

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Photo: Courtesy of Lucid