Babbuino

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https://www.autonews.com/legal-file/dealers-sue-rivian-illinois-over-direct-sales#:~:text=Illinois car dealers sued electric,-to-consumer sales model.&text=The car dealers are basing,42,000 people across the state.

Dealers sue Rivian, Illinois over direct sales
A complaint filed yesterday is another salvo against upstart vehicle makers' direct-to-consumer sales model.

Illinois car dealers sued electric truck maker Rivian in another salvo against upstart vehicle manufacturers' direct-to-consumer sales model.

Two trade groups that are plaintiffs in the lawsuit filed yesterday in Cook County Circuit Court say they acted after the Illinois Secretary of State’s office “turned a blind eye” to their complaints over several years.

Amazon-backed Rivian, which plans production at a plant near Normal, Ill., had no immediate comment. The Irvine, Calif.-based company has promised that deliveries of its first pickup will begin in June.

Another defendant is Lucid Motors, a California-based electric-vehicle company.

The two companies are opening showrooms in Chicago and Oak Brook, Ill., according to the lawsuit, whose plaintiffs include the Illinois Automobile Dealers Association and the Chicago Automobile Trade Association.

Conflict between manufacturers and dealers has been brewing nationwide since the earliest days of Tesla Inc., which doesn’t sell its electric cars through independent dealers.

In Illinois, Tesla was granted a license to sell cars directly “from a small number of locations,” according to the plaintiffs, which agreed to a settlement “only if the Secretary of State vowed to strictly enforce the law going forward.”

The car dealers are basing their argument in part on the economic impact provided by 700 dealers operating 2,300 franchises and employing 42,000 people across the state.

Here's the full complaint.






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DucRider

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Why force only vehicle manufacturers to pay a middleman? Think of the jobs that could be created if you forced every product made to go through at least one middleman before reaching the consumer. In fact, if you regulated at least two (or even three!) middlemen, the job creation would be exponential!
Direct sales on anything should be banned ASAP to protect existing jobs and create new ones!
 

Canthoney

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Why force only vehicle manufacturers to pay a middleman? Think of the jobs that could be created if you forced every product made to go through at least one middleman before reaching the consumer. In fact, if you regulated at least two (or even three!) middlemen, the job creation would be exponential!
Direct sales on anything should be banned ASAP to protect existing jobs and create new ones!
Sounds like our healthcare system! Zing! 🥸
 

sevengroove

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My initial reaction to these lawsuits has been "f these dealers" but I'm trying to think about it from a more balanced viewpoint. What is the cost of entry to do business as a car dealer? Do they take into account the fact that the only way consumers can buy vehicles is through dealerships? Can they exit the business easily without having to deal with a lot of sunk costs? I know this is not apples to apples but the whole Uber/Lyft/taxi medallion thing comes to mind. Those NYC taxi drivers spent millions of dollars, taking high interest loans, for these limited medallions for the right to operate a taxi with the assumption that there aren't alternate options available. So it put them in a really precarious position. I remember reading about many of them taking their lives because the double whammy of their investment tanking in value and not getting enough fares because of rideshare. The laws should have taken care of them - through buying back those medallions at a specified rate, for example - to fully allow Uber/Lyft to operate.

Is there a similar case to be made for these dealerships?
 

Drterreur

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This argument would be valid if Rivian sold first through dealership and then started to sell direct.

Reality: They have a better product than what dealers can sell... So the dealership just wants a piece of it.
 

DucRider

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My initial reaction to these lawsuits has been "f these dealers" but I'm trying to think about it from a more balanced viewpoint. What is the cost of entry to do business as a car dealer? Do they take into account the fact that the only way consumers can buy vehicles is through dealerships? Can they exit the business easily without having to deal with a lot of sunk costs? I know this is not apples to apples but the whole Uber/Lyft/taxi medallion thing comes to mind. Those NYC taxi drivers spent millions of dollars, taking high interest loans, for these limited medallions for the right to operate a taxi with the assumption that there aren't alternate options available. So it put them in a really precarious position. I remember reading about many of them taking their lives because the double whammy of their investment tanking in value and not getting enough fares because of rideshare. The laws should have taken care of them - through buying back those medallions at a specified rate, for example - to fully allow Uber/Lyft to operate.

Is there a similar case to be made for these dealerships?
Not really similar.
The laws that prevent a manufacturer for setting up franchises and then opening a direct sales model do make sense and do protect the dealers investment.
A manufacturer that elects not to use franchises is a different story.

The dealership model has advantages and disadvantages, as does the direct sales model. The market will eventually dictate what makes sense.

If Rivian, Lucid, Polestar, Tesla, etc set up a showroom and hire people to sell and service their vehicles, does it matter if it is owned by the manufacturer or one of the giant nationwide companies like Lithia? Are there really fewer jobs?

If your favorite burger chain is a company owned store or a franchised operation, does the consumer get a different experience based solely on that? Should we mandate that all restaurants must be operated as franchises?

As a note, some auto dealers associations are also trying to prevent internet services like Autonation direct from operating in their states.
 

bajadahl

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I find it fascinating that these dealers filed a lawsuit to protect the consumer.... how noble of them.....
The dealership model is dying... they just don't know it yet.... Hell, the argument could be made that the buying/leasing a car model is dying but I think that is out there a ways....
 

skyote

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The market will eventually dictate what makes sense.
Bingo, this is a consumer choice issue to me. It's a free market & consumer choice should rule.
 

MReda

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The reality is, if the dealer experience wasn't so terrible, consumers wouldn't prefer these alternate business models.

Seems like dealers might have other options aside from suing. Like not making customers hate shopping with them.
 
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Babbuino

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The reality is, if the dealer experience wasn't so terrible, consumers wouldn't prefer these alternate business models.

Seems like dealers might have other options aside from suing. Like not making customers hate shopping with them.
I agree with this. The dealer system makes sense since most people want to see the different configurations of the same model in person, and a quick test drive. What kills them is that everyone knows that when you decide you want a vehicle, you have to set a side ~3 hours of your life to get to a deal with the dealership...
It feels like going to a third world country and haggle with the merchant to buy any product since they add markups or unnecessary options just to raise the prices.
 

SANZC02

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The reality is, if the dealer experience wasn't so terrible, consumers wouldn't prefer these alternate business models.

Seems like dealers might have other options aside from suing. Like not making customers hate shopping with them.
Dealers make peanuts on sales. If they were forward looking they would be working with the EV manufacturers on a servicing model. That would truly benefit the consumers. It would make them relevant and save those coveted jobs they are talking about.

I’m sure the rebuttals to this will be EVs do not require service but in reality, nobody really goes to the dealer for routine maintenance unless they throw it into the purchase as a bonus. It is the warrenty work and major repairs where they make their money.
 

sevengroove

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Not really similar.
The laws that prevent a manufacturer for setting up franchises and then opening a direct sales model do make sense and do protect the dealers investment.
A manufacturer that elects not to use franchises is a different story.
That is helpful context, thanks for sharing. I wasn't aware of those laws protecting dealers for existing manufacturers. So how long are those agreements? What if say a Ford or a GM wants to move away from the dealership model? Do they have a course of action?
 

DucRider

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What kills them is that everyone knows that when you decide you want a vehicle, you have to set a side ~3 hours of your life to get to a deal with the dealership...
Guess what? Customers are more satisfied with their deal if it takes a long time and a lot of work.

Two customers walking into the same dealership on the same day looking at a FodgeMC Turbo Rambo W150 pickup. Both decide on the same trim level with an identical MSRP of $57,437.

Customer A: "I'll give you $50,000 and not a penny more". Sales Associate A: "We can do that. Sold!"

Customer B: "I'll give you $50,000 and not a penny more" Sales Associate B: "No way we can do that, the best we can do is $55K." They go back and forth and finally settle on $52,375 after a long negotiation.

Which customer thinks they got a better deal and is happier? It's not the one who paid less.
 

azbill

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Why force only vehicle manufacturers to pay a middleman? Think of the jobs that could be created if you forced every product made to go through at least one middleman before reaching the consumer. In fact, if you regulated at least two (or even three!) middlemen, the job creation would be exponential!
Direct sales on anything should be banned ASAP to protect existing jobs and create new ones!
The middleman already exists in most cases. Amazon, Rivian's biggest backer, is essentially a middleman or dealership for many products. Walmart, Target, etc. are all the middlemen. Very few products actually get sold directly from the manufacturer to the consumer. And even in the case where that does occur, there is usually a middleman that delivers the product (UPS, Fedex, USPS, DHL).

Then there is all the garbage from China, all that gets sold by some importer in the US, you rarely by directly from a Chinese company. In fact, I will bet that most things you buy online, thinking it is direct from the manufacturer, are actually things built for that company by another company in China.
 

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