Episode Details

Scout's Birthing Pains

Scout hasn't sold a single vehicle yet, but it's already faced several legal issues. It's mainly because of the brand's plan to take the direct sales route, and dealers aren't happy. Since Scout is under the Volkswagen Auto Group, dealer groups say sales have to be routed through them, as it is part of VW.

There have been suits in Colorado, Florida, and South Carolina, repeatedly filing cases against Volkswagen of America. That's on top of the other financial and legal obligations the company has. To say Scout isn't having an easy birth is a relative understatement.

More Dealers File Cases

A dealer group in Virginia has also filed a lawsuit alleging that Volkswagen is violating standard dealer agreements. It then adds that Scout Motors is 'aiding and abetting' the bypass by going for direct sales. Cases have also been filed in New York and Connecticut against both VW and Scout Motors.

One law firm representing the New York VW said, "They can't really seek refuge in this, what we call a shell game, by claiming that Scout is independent of Volkswagen. We feel we have a viable legal case to get an injunction and also damages for the lost business opportunities to the franchise dealers across the country."

But Tesla and Rivian Have Direct Sales, Right?

Well, yes, but not all states allow it. Wind back the clock a few years, and we go to Tesla's direct sales model, which faced similar legal hurdles as Scout Motors at the time. That said, Tesla, Rivian, and Lucid never had established franchise networks, which somewhat eased their burden. Mind you, it was still an uphill battle to get it done, but it was a win for them nonetheless.

However, Scout's case is different. Volkswagen owns the Scout brand, and the German automaker already has a well-established network of franchises across the U.S. The dealer groups argue that they have been losing business due to deposits and reservations. Plaintiffs have repeatedly mentioned that allowing direct sales sets a dangerous precedent.

One law firm told Automotive News, "It's Volkswagen today, and all manufacturers watch each other. So if manufacturers saw that dealers didn't stand up together, push back and assert their rights, it allows the other manufacturers to say, 'Hey look, Volkswagen was able to do it, so we can do it with impunity.' It's not just a case that's important for VW dealers, but it's equally important for dealers of all line makes."

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