Overview
Electric vehicle (“EV”) manufacturers such as Tesla, Lucid, and Rivian chose to forgo the dealership model and instead pursue direct-to-consumer sales. These EV manufacturers face a patchwork of state laws, some of which allow direct sales but most of which, to varying degrees, block or limit direct-to-consumer sales. Such laws have long been the subject of legal challenges.[1]
The newest in the growing line of direct-to-consumer cases comes from the Georgia Supreme Court, which on February 17, 2026, reversed a trial court ruling and allowed Lucid to proceed with a challenge to a Georgia law that prohibits direct-to-consumer motor vehicle sales. See Lucid Grp. USA, Inc. v. State, No. S25A1139, 2026 WL 436574 (Ga. Feb. 17, 2026).
Lucid argued that Georgia’s prohibition on the direct sales of motor vehicles violates several provisions of the Georgia Constitution, including its due process and equal protection clauses—particularly because the state law has a special exception that allows Tesla to sell direct-to-consumers in state. The trial court dismissed Lucid’s complaint, holding that the provision of the Georgia Constitution that authorizes the legislature to “regulate” the motor vehicle industry “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses on its citizens,” authorizes the direct sales prohibition.[2]
The Georgia Supreme Court, interpreting “in order to” to mean “for the purpose of,” disagreed in part, finding it was premature for the trial court to dismiss the due process and equal protection claims without first analyzing whether the direct sales prohibition was in fact enacted for the purpose of preventing abuses on the citizens of Georgia.[3] The court emphasized that the state’s police power to regulate the motor vehicle industry is limited to legislation which protects the “health, safety, and welfare” of the state’s citizens[4]—implying, but not stating outright, that a direct sales prohibition that exempts a single manufacturer might not be such a piece of legislation. The Georgia Supreme Court also noted that Lucid has standing to challenge the portion of state law that creates an exception for Tesla’s direct-to-consumer sales, as that law may be an improper “special law” that draws an arbitrary classification in relation to the purpose of the legislation.[5] Lucid now heads back to the trial court to litigate its remaining constitutional claims on remand.
It remains to be seen whether this opinion will serve as the basis for any other challenges to Georgia’s dealer law because it does not protect the health, safety or welfare of Georgia citizens. As this battle continues to develop, our Motor Vehicle Group will monitor it and report on significant developments, including Lucid’s challenge in Georgia.
If you have questions about this case, or any other aspect of motor vehicle franchise law, please contact Barack Ferrazzano’s Motor Vehicle Group.
[1] For example, in 2014, the Massachusetts Supreme Court affirmed the dismissal of a lawsuit by a dealers’ association that sought to shut down a Tesla salesroom. The court held that dealers did not have standing to sue because the state law at issue was not designed to give dealers protection against competition from an unaffiliated manufacturer. See Massachusetts State Auto. Dealers Ass’n, Inc. v. Tesla Motors MA, Inc., 15 N.E.3d 1152, 1154 (Mass. 2014). In 2020, Tesla settled its challenge to Michigan’s direct sales ban, under an arrangement that allows Tesla to operate sales galleries in Michigan so long as transfer to legal title to vehicles occurs out-of-state and allows a Tesla subsidiary to operate a Tesla repair facility in Michigan. See Tesla, Inc. v. Benson et al., Case No. 16-cv-1158, Joint Stipulation and Mot. for Entry of Dismissal, ECF No. 267 (W.D. Mich. Jan. 22, 2020) (W.D. Mich.). In 2024, the Fifth Circuit revived federal due process and antitrust claims Tesla brought as part of its challenge to a Louisiana state ban on direct-to-consumer motor vehicle sales. Tesla settled its case after the Supreme Court denied certiorari. See Tesla, Inc. v. Louisiana Auto. Dealers Ass’n, 113 F.4th 511 (5th Cir. 2024), cert. denied sub nom. Lala v. Tesla, Inc., 145 S. Ct. 2813 (2025).
[2] See Lucid, 2026 WL 436574, at *2.
[3] See id. at *8.
[4] Id.
[5] Id. at *9, *13.
