- VW insisted Scout is an independent brand, despite being backed by the conglomerate.
- The National Automobile Dealers Association is ready to challenge Scout in court.
- Scout has decided against using VW’s huge network of dealers to sell its models.
Scout Motors infuriated VW dealers across the United States last week when it confirmed that the upcoming Terra and Traveler will be available via a direct-sale model rather than through existing dealerships. However, state dealer associations and the National Automobile Dealers Association (NADA) are already fighting back and looking for ways to block the revived brand’s hotly contested plan.
While Tesla was a trailblazer for direct-to-customer sales in the US, it faced many legal hurdles in skirting regulations designed to protect franchised dealerships. Scout differs from Tesla in that it’s not a true startup and is owned by the VW Group. Its affiliation with the German car manufacturer may complicate its ability to sell vehicles without involving dealers, according to Richard Sox, managing partner at Bass Sox Mercer law firm.
Read: VW Dealers Furious As Scout Sells Terra And Traveler Direct To Consumers
“In the vast majority of states, the OEMs are not permitted to sell direct or compete with their dealers,” Sox told Auto News. “There are some exceptions to that, but those exceptions generally relate to the non-legacy OEMs who do not have and have never had a dealer network, i.e., Tesla. They’re affiliated with Scout, they have ownership. They have potentially some control. It certainly complicates Scout’s ability to sell direct in those particular states that would otherwise allow a manufacturer that is completely separate from a legacy OEM to sell direct.”
Scout has been eager to declare its independence since launching. The company plans to establish dedicated retail spaces across the country, allowing shoppers to place orders online. Scout will also manage all production and maintenance of its vehicles.
The chairman of Pohanka Automotive Group, Geoffrey Pohanka, has rejected the claim that Scout is independent of VW, telling Auto News “it’s the same”. He added that “VW has worked hard to reestablish itself in the United States, and they’re very sincere about that. This is contradictory to all the efforts they’ve made to reinvigorate the brand with new models.”
NADA’s chief executive, Mike Stanton, stated that the association is ready to challenge Scout “in courthouses and statehouses across the country.” While it remains unclear what legal route NADA will pursue, Stanton noted that “everything’s on the table right now.” He predicts that Scout’s plans to manage every aspect of the ownership experience through its app “will fail.”
Read: These Are The New Scout Terra Truck And Traveler SUV
University of Michigan Law School professor Daniel Crane believes dealer associations may first pick states where they have the strongest standing before beginning the legal battles. Richard Sox added that his law firm has already started working with 10 state dealer associations and is looking for the best ways to push back against the direct-to-consumer sales strategy.
