Lucid Group Sues Texas Over Direct Sales Ban

Written by Dan Mihalascu, InsideEVs
Nov. 9, 2022

Lucid Group has filed a federal lawsuit in Texas over the state's rules on auto dealerships, which the EV startup labels "economic protectionism."

In the suit filed in U.S. District Court, Western District of Texas (Austin division), Lucid said the state prevents it from selling its electric cars there and accused Texas of acting anti-competitively in forcing companies to sell their products through established dealerships.

Lucid named Monique Johnston, director of the Motor Vehicle Division at the Texas Department of Motor Vehicles, as the defendant.

As with many other electric vehicle startups, the Newark, CA-based company markets its vehicles online and through a network of stores it owns. Lucid argues its direct sales and in-house after-sales service are so intertwined, using an independent franchised dealer would not be economically viable and would harm the business.

"That tight and fast feedback loop, and the benefits it brings to Lucid's customers, would be impossible with third-party dealers interposed between Lucid and consumers," according to the plaintiff's statement seen by Bloomberg

It would appear Lucid is testing out a similar legal strategy to Tesla's to get its direct-sales model approved in Michigan. After more than three years of litigation, the parties settled and Tesla vehicles can now be sold and serviced in the state.

However, when it comes to its home state of Texas, Tesla faces similar challenges as Lucid, and is unable to sell directly to customers there. For years, Tesla has been lobbying to change dealership laws in Texas, but has so far been unsuccessful.

Lucid is currently struggling to develop its business building and selling the Air luxury sedan, which currently retails for more than $100,000---although a more affordable Air Pure version costing $87,400 will launch soon. 

The EV maker has cut 2022 production targets twice this year, with the latest forecast being 6,000 to 7,000 vehicles. Despite claiming more than 37,000 reservations in the second quarter, Lucid only managed to deliver 1,398 vehicles in the third, when it built 2,282 vehicles.

In the first three quarters of this year, Lucid has built almost 3,700 vehicles and delivered more than 2,400. To meet its production target for 2022, the company will have to produce at least 2,300 vehicles in the fourth quarter.

We thank InsideEVs for reprint permission.

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