Distributors still exist not because no one is asking for them, Really, but because of state franchise laws, which largely prevent automakers from selling directly to consumers. Which means that any threat to those laws puts distributors very, very hot under the neck. The latest evidence of that is a new lawsuit against Illinois, Rivian and Lucid.
Costume was filed on Thursday on behalf of a group of dealerships, the Illinois Automobile Dealers Association and dozens of other plaintiffs, primarily individual dealers located throughout the state.
The lawsuit seeks to prevent Rivian and Lucid from selling directly to consumers. in illinoisas merchants claim that doing so is illegal. Tesla currently operates locations in Illinois under a deal it made in 2019, which the dealers agreed to because they thought Illinois franchise law would be more strictly enforced in the future. Thursday’s lawsuit is an attempt to stop any possibility of Lucid and Rivian, who is based in Normal, Illinois, from playing by Tesla rules.
“We welcome new manufacturers to Illinois, especially those who are building innovative vehicles,” said David Sloan, president of the Chicago Auto Trade Association, another party to the lawsuit. “Our franchisee members already sell dozens of electric and hybrid vehicles. We ask that manufacturers sell them in Illinois in accordance with state law. We are not demanding that they cease their operations in the state, only that they grant a franchise to a distributor. “
And while the civil lawsuit the dealers filed offers many legal reasons why they should win (Illinois’ deal with Tesla seems strange), the dealers also claim they are doing this on behalf of consumers, which is where they instantly lose me. .
Through their press release:
At stake are the benefits to Illinois consumers and the economy generated by more than 700 distributors operating 2,300 franchises statewide. These benefits include:
- Consumer Protection: Dealers maintain service centers staffed with trained personnel to perform all recall and warranty repairs, where dealers act as consumer advocates to manufacturers.
- Parts Availability and Service – Dealers maintain an inventory of parts and provide timely service to consumers who depend on the daily use of their vehicles.
- Price competition – Consumers have many options, and dealer competition saves buyers money. Direct sales by manufacturers result in a monopoly that offers no price benefit.
- Community Benefits: Franchised dealers are long-established local businesses that generate millions of dollars in revenue and economic development, employ 42,000 people statewide, and support many local causes and events.
All of these arguments are pretty silly, but my favorite is his claiming direct sales results in some kind of monopoly. It’s no wonder Tesla is doing so well.
Anyway, for my money dealers would be better served by admitting who they are: textbook intermediaries. “We exist because for now we have the law on our side and we will fight to keep it that way ”. they might say. It would not be the most attractive argument, but at least it would be honest.
You can read the full complaint below.