Rivian (RIVN) is taking Ohio’s Department of Motor Vehicles to federal court over a law that bans automakers from selling vehicles directly to consumers. In the lawsuit, Rivian calls the ban “irrational in the extreme” by arguing that it hurts competition and limits customer choice. The EV maker also claims it’s unfair that Tesla (TSLA) is allowed to sell directly in Ohio through a special deal, while other companies are blocked from doing the same.
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It is worth noting that the direct-sales model has long been controversial in the U.S. and dates back to the early 1900s, when companies like Ford (F) and GM (GM) sold vehicles directly. Over time, state laws gave car dealers more control due to fears that monopolies might form. Therefore, dealership groups continue to resist change by lobbying against direct-to-consumer sales. However, in Ohio, Tesla managed to get around the restrictions by agreeing to open three physical stores, which is a privilege that Rivian says is being unfairly denied to others.
Interestingly, this is Rivian’s first time challenging such a law in court. The company also points out that it can service cars, rent vehicles, and even deliver new cars sold out of state, but is barred from completing in-state sales. Rivian argues that this makes no sense and hurts consumers with fewer options and higher costs. As a result, Rivian’s Chief Administrative Officer, Mike Callahan, called the ban “archaic,” saying that it violates basic economic freedoms and should be overturned.
Is RIVN Stock a Buy or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on RIVN stock based on seven Buys, 15 Holds, and three Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average RIVN price target of $14.92 per share implies 20.2% upside potential.
