California Lawsuit Targeting Scout's Direct Sales May Alter Your Car Purchasing Experience | Carscoops

      This marks the most recent development in the ongoing conflict between dealers and Scout.

      The California New Car Dealers Association (CNCDA) has initiated a lawsuit against VW and Scout, alleging that both companies are circumventing dealer franchise laws in the state by selling directly to consumers.

      While Scout previously dismissed the CNCDA’s requests, it now pledges to defend itself in court.

      The latest chapter in the conflict between dealers and Scout Motors has intensified into a lawsuit. The CNCDA has sued Volkswagen and Scout, claiming they are violating the law by selling directly rather than through dealerships.

      Disregarding free-market principles, dealers are fiercely competing for their share of the market and are resorting to legal action to secure it.

      Brian Maas, president of the CNCDA, remarked that “VW dealers would appreciate the chance to sell Scout trucks and SUVs, but their manufacturing partner is preventing this opportunity, in clear violation of California law.” The implication is that VW's Scout Motors is unlawfully allowing customers to purchase vehicles directly, thus bypassing the conventional dealership model.

      Maas continued to assert, “Volkswagen cannot selectively decide which vehicles to sell independently or through its franchised dealer network while reserving the most lucrative ones for itself. This illegal competition will negatively impact not only the dealers but also the communities and car buyers they serve.”

      However, he did not mention how excessive markups, as seen with some California dealers, also adversely affect consumers.

      Response from Scout and VW was prompt, and both companies rejected the CNCDA’s claims. After the dealer association sent a cease-and-desist letter last year, Scout replied with a firm statement. “VWGoA is not sanctioned by Scout Motors to sell, and will not be selling or distributing, Scout-branded EVs in California or elsewhere. Scout Motors and the Scout brand operate independently from VWGoA and its brands like Volkswagen and Audi,” stated Scout’s general counsel, Neil Sitron.

      If anyone thought Scout would retreat, they are mistaken. Sitron emphasized, “Scout Motors will not engage with anyone who threatens or tries to intimidate it, whether directly or indirectly…. if the CNCDA follows through with its threats, Scout Motors will robustly defend against them.”

      Consequently, it appears Scout will have to defend itself in court. The CNCDA is accusing the manufacturers of unfair competition and false advertising while seeking civil penalties that may exceed $35 million.

      Maas asserted that this lawsuit “sends a message to every automaker.” That message may indicate “here’s how to bypass dealers.” Tesla, Lucid, and Rivian have already demonstrated that dealerships are unnecessary. If Scout and VW prevail in this lawsuit, it could illustrate a new pathway for traditional automakers towards direct sales, a model that seems to attract consumer interest.