On February 17, 2026, the Supreme Court of Georgia issued its decision in Lucid Group USA, Inc. v. State of Georgia, addressing the constitutionality of Georgia’s direct sales ban under the State’s dealer law framework. The Court did not invalidate the ban, but it clarified that the constitutional protection shielding Georgia’s Motor Vehicle Franchise Practices Act is not automatic. Instead, immunity under Article III, Section VI, Paragraph II(c) depends on whether the challenged regulation was enacted for the purposes identified in the Constitution.

That clarification may influence future challenges to Georgia’s dealer statutes and related distribution regulations.

Background:

Georgia’s motor vehicle franchise statute has a long constitutional history. The General Assembly first enacted a Motor Vehicle Franchise Practices Act in 1974 to regulate dealer-manufacturer relationships. That statute was replaced in 1976, but key provisions were struck down on constitutional grounds in 1977, including limiting the number of franchised dealers as improper restraints on competition. A 1979 reenactment met the same fate, with the Georgia Supreme Court invalidating the Act in its entirety.

In response, Georgia voters approved a constitutional amendment in 1992, now codified as Article III, Section VI, Paragraph II(c). That amendment expressly authorized the General Assembly to regulate the motor vehicle industry. The current Act was reenacted under that authority prohibits manufacturers and related entities from (1) owning or controlling more than a 45 percent interest in a dealership, and (2) selling new motor vehicles directly to consumers except through a franchised dealer. See O.C.G.A. § 10-1-664.1(a), (c).

In 2015, the General Assembly expanded the reach of the direct-sales prohibition by changing the definition of “new motor vehicle.” Before the amendment, the statute applied only to vehicles already sold to a dealer, which meant manufacturers were not expressly barred from direct consumer sales. The amended definition includes any vehicle without an issued title and effectively requires manufacturers to sell through franchised dealers.

At the same time, the legislature added a narrow exception for certain zero-emissions manufacturers that were already operating in Georgia as of January 1, 2015. That exception allowed qualifying manufacturers to own up to five dealership locations and continue direct sales, provided they met specific statutory conditions.

In August of 2021, Lucid, an electric vehicle manufacturer that sells directly to consumers in other states, applied to the Georgia Department of Revenue for a dealership license to open a retail location in Georgia. The Department denied the application under the State’s direct-sales prohibition.

Lucid then filed suit, asserting that the prohibition violated the Georgia Constitution’s due process and equal protection provisions, as well as its limits on general and special legislation. The trial court dismissed the complaint, finding, in relevant part, that Lucid’s due process and equal protection claims were barred by Paragraph II(c)’s express authorization for the General Assembly to regulate the motor vehicle industry. Lucid appealed.

The Court’s Analysis:

The appeal centered on Article III, Section VI, Paragraph II(c) of the Georgia Constitution. That provision allows the General Assembly to regulate the motor vehicle industry “notwithstanding” due process and equal protection, but only “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses upon its citizens.”

The trial court treated this language as broad immunity and dismissed Lucid’s constitutional claims without examining whether the direct-sales prohibition actually served those stated purposes.

The Supreme Court disagreed, holding that Paragraph II(c) does not give the legislature automatic protection for any motor vehicle regulation—noting the phrase “in order to” limits the protection to laws enacted for the purpose of preventing the specific abuses listed in the Constitution. Because the trial court did not analyze whether the direct-sales prohibition was enacted to serve those purposes, the Supreme Court vacated the dismissal and remanded the case for further proceedings. The Court expressly declined to decide whether the prohibition ultimately satisfies Paragraph II(c)’s purpose requirement.

Lucid also argued that the 2015 amendment violated constitutional limits on special legislation, alleging that the zero-emissions carveout effectively applied only to Tesla. The Court concluded that the direct-sales prohibition itself is a general law that applies uniformly statewide and therefore does not violate the Constitution’s general-law requirement.

The Court did, however, separate that conclusion from the question of the 2015 amendment as a whole. Although Lucid lacked standing to challenge the carveout provision in isolation, the Court held that Lucid may pursue a claim that the 2015 amendment, by expanding the prohibition while creating the carveout, constitutes impermissible special legislation. The trial court had not fully analyzed that theory, and the Supreme Court remanded for further consideration.

Implications:

The Supreme Court’s decision in Lucid Group USA, Inc. v. State of Georgia clarifies that the Georgia Constitution’s special authorization for motor vehicle regulation is not unlimited. While the direct-sales prohibition remains in place, its protection under Paragraph II(c) is tied to legislative purpose rather than automatic immunity.

For manufacturers, dealers, and industry stakeholders operating in Georgia, the decision raises several practical considerations:

• First, future challengers may contend that particular provisions of the Motor Vehicle Franchise Practices Act do not meaningfully advance the specific purposes identified in Paragraph II(c). Courts may therefore be required to engage more directly with legislative intent before dismissing due process or equal protection claims at the outset.

• Second, legislative findings and clearly articulated statutory objectives may carry greater weight in defending franchise regulations. If immunity hinges on purpose, the record demonstrating that purpose becomes central.

• Third, although the case arises in the motor vehicle context, the Court’s insistence on giving effect to constitutional purpose language may signal closer scrutiny of the other regulated vehicle categories enumerated in Paragraph II(c): tractors, farm equipment, and heavy equipment.

Finally, because the Court remanded the due process and equal protection claims, the ultimate constitutional validity of Georgia’s direct-sales regime remains unresolved.

If you have questions about any of the matters discussed above, please contact the author or your regular Nelson Mullins contact.

Jake Carroll advises clients in the construction, manufacturing, and real estate industries in complex transactions, contract and business disputes, and related corporate matters. He is the co-author of the Georgia Construction Law Handbook and frequently writes and speaks on licensing and regulatory issues. He also has extensive experience in the agricultural equipment manufacturing segment, advising clients on dealer relationships, distribution structures, and compliance with state dealer laws.