Illinois Auto Dealers Sue State Over Rivian’s Direct-Sales Model


Rivian’s plan to sell vehicles directly to consumers has raised the ire of two auto-dealer groups in Illinois.

The Illinois Automobile Dealers Association and the Chicago Automobile Trade Association have sued the Illinois Secretary of State, claiming that Illinois law requires new-car sales to flow through licensed franchise dealers and prevents new-car manufacturers from selling directly to consumers.

(Full disclosure: I’ve done paid and unpaid work for CATA before being hired at TTAC, and while employed here I have contributed a guest column for the Chicago Auto Show brochure and have appeared on the DriveChicago radio program, which is hosted in part by CATA employees, to discuss cars and the industry).

Rivian will build its EV trucks in Normal, Illinois, and has plans to open a showroom in Chicago’s Fulton Market district. That will be one of nine planned U.S. locations.

Meanwhile, EV maker Lucid has plans to open a studio at Oakbrook Center mall in west suburban Oak Brook this year — coincidentally, not too far from CATA’s offices.

“The lawsuit will seek a ruling that Illinois laws requiring vehicle sales through franchised dealers apply to all motor vehicle manufacturers entering the market in the same way that they apply to existing manufacturers. The suit also seeks to prevent (Illinois Secretary of State Jesse) White’s office from issuing dealer licenses to motor vehicle manufacturers which would allow them to not have franchised dealers,” CATA said in a statement announcing its intent to join IADA in the suit earlier this month.

The two dealer groups clarified that they aren’t opposed to Rivian (and Lucid) from selling cars in Illinois, but rather that they do so via franchised dealers.

“We welcome new manufacturers to Illinois, especially those who are building innovative vehicles. We ask that manufacturers sell them in Illinois according to state law. We’re not demanding they cease operations in the state, just that they franchise a dealer,” said David Sloan, president of the CATA, in a statement emailed to Chicago Business Journal.

The lawsuit was filed in Cook County court and reads in part: “The Secretary of State’s failure to enforce existing law will result in real and irreparable harm to plaintiffs and those employed in the new vehicle franchise industry, as well as the public at large.”

Obviously there’s a lot of self-interest at play on both sides. Dealer groups worry about the future of their slice of the automotive industry should states allow OEMs to sell to consumers directly. A direct-sales model could end the franchised-dealer model, and even if it didn’t, it likely wouldn’t be a positive for new-car dealers.

Meanwhile, OEMs would be able to exert more control over the process if they sold cars directly to customers, and small startups like Rivian would likely save money and hassle. If Rivian can’t sell EVs directly to consumers in Illinois, it will have to find existing franchised dealers to work with.

We’ve reached out to CATA and Rivian for comment and have not yet heard back. We will update if and when we do.

[Image: Rivian]

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