CA Dealer Cries Foul, Tries to Stop Scout's Direct Sales Model

The Volkswagen Group and its new EV brand, Scout, have drawn the ire of existing dealers in the state over California's dealer franchise law.

Dealers in the state, known for being the most progressive when it comes to EVs, are planning to introduce direct sales models of the new Scout brand, which the VW Group recently revealed will begin producing the Terra pickup truck and Traveler SUV in 2027 The company is dissatisfied with this.

As first reported by Automotive News, the California New Car Dealers Association sent a December 20 letter to VW Group and Scout advising them to cease and desist on their plans to sell Scout vehicles directly to California buyers. letter recommending that they cease their plans to sell Scout vehicles directly to California buyers.

The dealer association, which represents more than 1,200 dealers in California (including more than 50 VW Group dealers), said that California's dealer franchise law prohibits automakers from using their affiliates to sell or service vehicles directly to their franchisees, and they argue that under California law, Scout is considered an affiliate of the VW Group.

Dealer associations argue that if the direct sales plan goes forward, new and existing VW Group dealers, many of whom have previously requested pickup from the automaker, will be excluded from the opportunity to sell and service Scout vehicles.

Automakers such as Tesla, Rivian, and Lucid already operate company-owned dealerships in California. However, none of these brands have direct ties to the major automakers, and in the case of Livian, this is beginning to change with a $5.8 billion investment from the VW Group earlier this year.

Polestar, which has ties to Volvo, has a direct sales model in California, but balances this by integrating some customer service and service itself through Volvo dealers. A similar approach may have helped ease tensions in the VW Group's efforts to establish direct dealerships for scouting.

Working with existing dealers, especially on the service side, has the advantage of eliminating the need to build new infrastructure. Rivian CEO RJ Scaringe, who recently described the dealer franchise law as “as close to corruption” as he could get at a media roundtable, acknowledged that while the company is trying to expand its own service network, it faces a service backlog.