Lucid's fight to sell cars in Texas could give it a leg up in the ultracompetitive electric-vehicle market

• Electric-vehicle startups are selling their flagship products using direct-to-consumer models.
• That has long rubbed states and legacy dealer associations the wrong way.

Lucid Motors is the latest electric-vehicle startup to embark on a direct-sales legal battle, suing Texas for the right to open a store in the state, rather than sell cars through a dealership.

Lucid's move mimics Tesla's playbook for selling directly to customers. It's also a sign that there could be more legal confrontations to come for other budding EV makers, like Rivian and Fisker.

Following in the footsteps of Tesla, most new EV companies are opting for direct-sales models, forgoing the dealers they see as unnecessary third parties. Lucid says its "studios" — where customers can see products and take test drives — eliminate the haggling customers often experience at dealerships.

But every state has its own set of laws requiring cars be sold through dealers, and any automaker hoping to run its own store (whether physical or online) must individually fight each state's franchise laws and powerful dealer lobbyists.

Tesla has long been engaged in such legal battles and has made significant headway with various workarounds and exceptions granted at the state level.

At a time when legacy automakers' products are coming to market quickly, Lucid's latest bid in Texas could indicate the startup is in a rush to secure more orders, expand its footprint, and get its piece of critical EV market share.

The uncertainty of how and where the startups can sell their vehicles makes their uphill battle for market share that much more difficult, Jessica Caldwell, an automotive analyst for Edmunds, said.

The upshot, Caldwell told Insider, is that the outcomes of these efforts to sell directly to customers will create winners and losers among EV startups.

"The ones who get through this will have better long-term prospects," she said.

Lucid's latest

In the latest spat involving states, dealers, and EV startups, Lucid sued the Texas Department of Motor Vehicles last week for the right to open up shop, saying the state was preventing it from doing so, Bloomberg first reported.

"This prohibition is irrational in the extreme: It hurts competition, reduces consumer choice, and drives up costs and inconvenience, with no countervailing benefit whatsoever," the company wrote in its suit.

Rivian has embarked on its own direct-sales crusades, most recently in Georgia, where the startup is building an assembly plant tentatively scheduled to open in 2024.

What consumers can expect

Last year, Tesla, Rivian, and Lucid joined forces to push for bills allowing direct sales in eight states. Many of these efforts are still in progress while Rivian, Lucid, and Tesla continue to sell vehicles remotely. Meanwhile, the startups are looking to set up service centers and other such brick-and-mortar operations that don't specialize in sales.

Even with the legal troubles, EV startups are moving full speed ahead on direct to consumer. And this may even rub off on the likes of Ford.

Legacy automakers have shown signs of imitating the direct-sales model, setting up online preorders for EV launches similar to Tesla's. Industry executives have said they don't plan to do away with the dealership model — and instead change the role of the dealer to more of a delivery specialist.

This effort has been hastened by an industrywide move toward factory orders as the pandemic and supply-chain snags limit the new-vehicle inventory on dealer lots.

"We've got to go to nonnegotiated price. We got to go to 100% online," Ford CEO Jim Farley said at an investor conference earlier this year.

He set his sights on Tesla earlier this year at the production launch of the electric F-150 Lightning.

"Our dealers can do it, but the standards are going to be brutal — they're going to be very different than today," he said. "We're working with our dealers as we speak through this."