- Scout will sell its Terra and Traveler EVs directly to consumers, avoiding the franchise dealer model that Volkswagen uses.
- VW dealers are angry about being cut out and gearing up for a big fight in courthouses and state governments across the country.
- It's not clear who will win, but the fight could cause issues for Scout as it tries to get its first products off the ground.
Volkswagen dealers are gearing up for a fight. The company's U.S. retailers are livid over being cut out of VW's new Scout brand, which plans to sell its Terra and Traveler models directly to consumers. So a group of VW dealers is getting ready to challenge VW's plans in court and in state capitols, leveraging their deep connection to state governments, as new reporting from Automotive News details.
“To just show these new vehicles that would have fit very nicely into VW’s portfolio, it’s like rubbing salt in the wound here,” National Auto Dealers Association CEO Mike Stanton told Automotive News. “What’s really different about this is that we’ve got a brand, it’s owned by Volkswagen AG, that is going to compete directly with franchise dealers. That’s not OK.”
Gallery: Scout Traveler SUV And Terra Pickup Concepts
Most states bar car companies from directly competing with their own dealerships, and many bar direct sales altogether. Many states have made exceptions or have rules that allow companies like Tesla to sell there, given that it doesn't have any dealers to compete with. But even Tesla's company-owned stores required a decade-long legal battle in countless states, some of which still don't allow Tesla to operate stores. Scout thinks it can follow that model, but the VW connection could prove to be an issue. Many predicted this issue.
As Stanton's quote shows, one of the key arguments the dealers have on their side is that Scout will "compete" with VW dealers. That's explicitly against the law in many states. But Scout has two defenses. First, it is not VW. The company has stressed that is an independent company owned by VW. This holds some water. I mean, if Volkswagen bought Rivian, would it have to close its factory stores or sell them off to dealers? The truth is, we don't know, because this has never been tested. Laws require interpretation and application, and this is a gray area.
Another one: Does Scout really compete with Volkswagen? Will any potential buyer of a Volkswagen Toas gasoline compact crossover say, no, in fact, I'll get an electric pickup truck with a bench seat instead? Probably not. But will someone considering an Atlas Cross Sport decide instead to chance it on a more exciting looking EV? Maybe. It's not likely, but on a long enough timeline it'll happen. At the very least, Scout's existence will likely make Volkswagen think twice about pushing toward any more outdoorsy or truckish products. But again, that's not what Volkswagen makes here, anyway.
It's a tricky problem. Volkswagen can argue that a new brand should not have to abide by the franchise agreements of a separate brand owned by the same company. It's not like VW dealers all got the rights to sell Lamborghinis as soon as they acquired that brand. No, the fight here has a broader angle: Dealers are threatened by direct-to-consumer models, and have enshrined protections from them in many state laws. A company store model from your own parent brand is a death knell, especially when Volkswagen itself is in rough waters.
The dealers are certain to leverage their deep pocketbooks and deep state government connections. VW is going to take advantage of its even deeper pocketbook. The fight will be messy. As Stanton told Automotive News, the NADA is going to fight anywhere it can fight, using any argument it can make. "Everything’s on the table right now," Stanton said.
Contact the author: Mack.Hogan@insideevs.com.
