Dealers Move to Block Scout’s ‘Unlawful’ Direct Sales Plan That Cuts Them Out Entirely

[chucchinchilla]

Dealers Move to Block Scout's 'Unlawful' Direct Sales Plan That Cuts Them Out Entirely

Scout has a long fight ahead if it wants to sell electric trucks and SUVs directly to American shoppers, as pushback in California demonstrates.

www.thedrive.com

While there are a couple threads talking about potential lawsuits, this is the first real shot at Scout from dealers and, more specifically, comes from California dealers.

Here’s how CNCDA put it in its cease-and-desist letter:

“Under Vehicle Code section 11713.3(o), automobile manufacturers and their affiliates are forbidden from competing with their own vehicle franchisees. Scout is an affiliate of VW under California law. Vehicle Code section 11713.3(z) defines ‘affiliate’ as ‘a person who directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another person.’ [emphasis added by CNCDA]. Since as early as 2022, VW has been directly and substantively involved in Scout’s development and revitalization of its vehicles, including VW’s investment of billions of dollars into a Scout production plant in South Carolina.”

I guess the million dollar question is, how much actual control does VW have over Scout?

 

[KarlT]

Exactly. Is Scout, an affiliate of VW?

 

[pwrofgrayskull]

Yikes. I was hoping this would somehow magically not come to fruition, but there it is.

I assume Scout Motors and their legal team fully saw this coming, so I imagine they’ve got a handle on it…and more importantly I assume they have a solid plan in place regarding how to deal with it.

In my opinion, the direct-to-consumer model is a big piece of the puzzle for Scout Motors’ path to success.

 

[TimmyHil08]

We demand answers!


im starting to not believe a thing that Jamie has told me about VWs investment in Scout. I think they are a-lot more than just an investor.

Im only kidding jamie. I know they are only an investor and that they check in every once and awhile.


Also isn't Scout independent from VW? So why would California even bring up that its a VW company if its not?

@Jamie@ScoutMotors

 

[Chaz26]

Yikes. I was hoping this would somehow magically not come to fruition, but there it is.

I assume Scout Motors and their legal team fully saw this coming, so I imagine they’ve got a handle on it…and more importantly I assume they have a solid plan in place regarding how to deal with it.

In my opinion, the direct-to-consumer model is a big piece of the puzzle for Scout Motors’ path to success.

I hope so, after buying a Tesla as my last vehicle, it is my hope to never have to set foot in a dealership again. If it does end up going through dealers, if I see even a $1 markup or a forced extra being added that I don't want, my order will be cancelled.

 

[Scoutsie]

I have faith that Scout has a plan for this. They’re no dummies. I’m curious to know what their argument is going to be… are they independent of Volkswagen? Will the existing infrastructure be incapable of selling and servicing the Scouts? I’m hoping they’ve put thought into this and know how to handle it and are ready to tell the dealers to pound sand. I’m hoping they’ve got a sound legal strategy ready to go.

 

[TimmyHil08]

I have faith that Scout has a plan for this. They’re no dummies. I’m curious to know what their argument is going to be… are they independent of Volkswagen? Will the existing infrastructure be incapable of selling and servicing the Scouts? I’m hoping they’ve put thought into this and know how to handle it and are ready to tell the dealers to pound sand. I’m hoping they’ve got a sound legal strategy ready to go.

I would hate to have to quote Jamie(The MVP of The Scout Forum) lol.

“Scout is set up as an independent U.S. company. VW is our biggest investor. Like any investor they ask how we are spending the money and like to see progress on our end. We have access to the Volkswagen Group parts bin, but we are building this on a completely new body-on-frame platform.”

Right there its said perfectly clear. I would really hope that Scouts Legal team wins. California will do anything to destroy the little guy and praise the big guy

But also if they are gonna screw on company might as well tell TESLA and RIVIAN that they cant sell D2C either.

 

[Scoutsie]

Yeah. I know he won’t be able to comment on this for obvious reasons, but I hope that Scout wins this. Nobody likes dealerships. They do nothing for consumers. Those laws are not made for the protection of consumers. They’re made for the protection of businesses. I seriously don’t care about protecting the generational wealth of car dealer families. When the owner’s Ferrari showed up in the service bay of the Toyota dealership that I used to go to that used to be a lovable dump but got bought out by one of those families that own like six gazillion dealerships up and down the East Coast, it suddenly became a money sink that kept finding BIG EXPENSIVE PROBLEMS with my car and started charging money for coffee. Not paying for someone’s Ferrari, not like that. Dealers can all go to hell.

 

[J Alynn]

I looked some of this up the other week. Not to mention that I posted yesterday that Scout plans on direct delivery to owner. There are a bunch of states that permit direct to consumer so worst case I would think they’ll set up shop in those states then either come to SC to pick up at factory or have it delivered to your door.
SM did t invest millions upon millions this far without some planning contingencies.
That all said -F&@#%! Dealerships

 

[pwrofgrayskull]

I hope so, after buying a Tesla as my last vehicle, it is my hope to never have to set foot in a dealership again. If it does end up going through dealers, if I see even a $1 markup or a forced extra being added that I don't want, my order will be cancelled.

I agree. I have no desire to see a dealership ever again. Too many terrible and deceitful personal experiences for me. Honestly I would step back and re-evaluate if it went that far. I’d possibly choose a different route entirely such as considering holding off and buying one used at some point in the future via private party or online purchase.

 

[Scoutsie]

I looked some of this up the other week. Not to mention that I posted yesterday that Scout plans on direct delivery to owner. There are a bunch of states that permit direct to consumer so worst case I would think they’ll set up shop in those states then either come to SC to pick up at factory or have it delivered to your door.
SM did t invest millions upon millions this far without some planning contingencies.
That all said -F&@#%! Dealerships

Damn the man! Save the Empire!

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Yeah, I’d possibly fall back to my crush, the Rivian R2 or the R3, the Scout III that never was. Sorry, Scout, but no more dealers. Screw car dealers. They’re the worst. Not your fault. A very clear message has to be sent to the dealers about how much they suck.

 

[SpaceEVDriver]

If Scout loses this fight, I may very well cancel my reservation. I have never realized any added value by having to go through a dealer.

 

[J Alynn]

The other option is for SM to use their teeth. Each dealer gets 2. If you sell it over MSRP your allocation drops to 1 per year. If customer orders online (like Acura is doing with new EV) it’s MSRP or allocation is (1) per year. I’d set everything up based on allocation beyond orders. Imagine the dealership investing the money to be SM compliant then knowing if a single customer files a complaint their allocation drops to one per year. That would almost force them to change the entire way they sell. IN FACT, as I write this I think the Acura EV order system is the absolute way to go if dealerships have to happen. When you go on SM to build your order the first step is reading the SM business model where it clearly states if dealer doesn’t treat you like gold you may file a complaint to “said email address to SM”. That instantly kills the dealer’s allocation and subsequent orders go to next closest dealer OR the hold back or any incentive goes toward shipping the vehicle direct to buyer because “said dealer” didn’t meet their obligation under the SM sales ethics clause. At some point the great dealers will get smart and realize if they treat people right they’ll get rich. For those who followed bronco6g forum a dealer by name of Granger locked pricing in from day one and to date has probably sold 1,000’s of broncos because they weren’t greedy scum of the earth.

 

[TimmyHil08]

Wasn’t this exact thing tried back in November after the reveal.

Also isn’t it illegal to stifle other businesses to protect your own under an antitrust law? That’s exactly what NADA and California are doing by blocking Scout from selling direct to consumers it’s gonna hurt Scout by a loss of customers who are here for the D2C.

 

[Scoutsie]

The other option is for SM to use their teeth. Each dealer gets 2. If you sell it over MSRP your allocation drops to 1 per year. If customer orders online (like Acura is doing with new EV) it’s MSRP or allocation is (1) per year. I’d set everything up based on allocation beyond orders. Imagine the dealership investing the money to be SM compliant then knowing if a single customer files a complaint their allocation drops to one per year. That would almost force them to change the entire way they sell. IN FACT, as I write this I think the Acura EV order system is the absolute way to go if dealerships have to happen. When you go on SM to build your order the first step is reading the SM business model where it clearly states if dealer doesn’t treat you like gold you may file a complaint to “said email address to SM”. That instantly kills the dealer’s allocation and subsequent orders go to next closest dealer OR the hold back or any incentive goes toward shipping the vehicle direct to buyer because “said dealer” didn’t meet their obligation under the SM sales ethics clause. At some point the great dealers will get smart and realize if they treat people right they’ll get rich. For those who followed bronco6g forum a dealer by name of Granger locked pricing in from day one and to date has probably sold 1,000’s of broncos because they weren’t greedy scum of the earth.

Oh my , I love this.

On the topic of theoretical chess moves, it’s never a bad idea to find out where your local reps stand on stuff like this: they’re a lot easier to get ahold of than a congressperson. Writing an e-mail to complain about how much it sucks to deal with car dealerships over car manufacturers directly doesn’t cost you anything but the time it takes to write an e-mail to say “Hi, I live in your district. I hate dealing with car dealerships because [blah]. The advantages that I can see of dealing directly with a car manufacturer are [blah]. Unfortunately, we can’t do that in this state. Do you think that’s fair? I look forward to your reply and advice as your constituent. Thank you, X” where “X” is your name.

 

[CarTechGeek]

This was obviously going to be a much more uphill battle than Tesla had.

Tesla has zero attachments to any pre-existing legacy franchise/dealer network, so dealers should have no real leg to stand on when fighting Tesla, it's only lobbying (AKA political corruption IMO), that perverts franchise law, to interfere with unrelated entities and prevent them from direct selling. IMO, this would be like if McDonalds and Burger King lobbyists forced all restaurants to be franchises. You could only buy a burger if it was from a big chain franchise. But this is the absurdity that some car dealer lobbies have perverted into law.

Scout is entirely funded by VW, and likely will be use VW parts where applicable, so it's going to be extremely difficult to argue it's a completely independent entity.

I doubt the Scout Legal team has any kind of slam dunk workaround here. This is going to be a bunch of individual State fights, that will largely be unpredictable, except anywhere that Tesla still can't sell is pretty much guaranteed to fail, because as previously noted, Scout is in a worse position than Tesla is.

IMO, franchise law has rightful place in protecting franchisee's from abuse as was the original intent. So VW can't set up a direct selling outlet across the street and undercut it's dealers selling the same product. This is the kind of thing it was intended to prevent and that is reasonable.

I do think VW should be able to fund an all new brand, sell those as they see fit. Provided they aren't really just rebranded VWs (another version of the same product). Since this is an all new product that no dealer sells, new brand, it would be reasonable to allow this to be directly sold.

But I think this will be a very tough fight, and they will lose many of the state battles.

 

[DBHowe]

We demand answers!


im starting to not believe a thing that Jamie has told me about VWs investment in Scout. I think they are a-lot more than just an investor.

Im only kidding jamie. I know they are only an investor and that they check in every once and awhile.


Also isn't Scout independent from VW? So why would California even bring up that its a VW company if its not?

@Jamie@ScoutMotors

Because it's California! Not the only way that we're a mess.

 

[Scoutsie]

This was obviously going to be a much more uphill battle than Tesla had.

Tesla has zero attachments to any pre-existing legacy franchise/dealer network, so dealers should have no real leg to stand on when fighting Tesla, it's only lobbying (AKA political corruption IMO), that perverts franchise law, to interfere with unrelated entities and prevent them from direct selling. IMO, this would be like if McDonalds and Burger King lobbyists forced all restaurants to be franchises. You could only buy a burger if it was from a big chain franchise. But this is the absurdity that some car dealer lobbies have perverted into law.

Scout is entirely funded by VW, and likely will be use VW parts where applicable, so it's going to be extremely difficult to argue it's a completely independent entity.

My legal expertise comes from watching Law and Order, having hired lawyers, and dating a lawyer whose name I couldn’t find a record of in the state bar because he’d never actually been registered apparently, but car manufacturers get parts from each other and from the same places if I’m not mistaken. I don’t think that makes them (Scout) beholden to VW unless there’s an agreement that says as much. Whatever their relationship is on paper is what whatever their relationship is, and if the relationship is specified to be different from the relationships that exist between, like, VW and Audi, the dealers can’t do much about much. That would maybe be the move?

 

[DBHowe]

This was obviously going to be a much more uphill battle than Tesla had.

Tesla has zero attachments to any pre-existing legacy franchise/dealer network, so dealers should have no real leg to stand on when fighting Tesla, it's only lobbying (AKA political corruption IMO), that perverts franchise law, to interfere with unrelated entities and prevent them from direct selling. IMO, this would be like if McDonalds and Burger King lobbyists forced all restaurants to be franchises. You could only buy a burger if it was from a big chain franchise. But this is the absurdity that some car dealer lobbies have perverted into law.

Scout is entirely funded by VW, and likely will be use VW parts where applicable, so it's going to be extremely difficult to argue it's a completely independent entity.

I doubt the Scout Legal team has any kind of slam dunk workaround here. This is going to be a bunch of individual State fights, that will largely be unpredictable, except anywhere that Tesla still can't sell is pretty much guaranteed to fail, because as previously noted, Scout is in a worse position than Tesla.

IMO, franchise law has rightful place in protecting franchisee's from abuse as was the original intent. So VW can't set up a direct selling outlet across the street and undercut it's dealers selling the same product. This is the kind of thing it was intended to prevent and that is reasonable.

I do think VW should be able to fund an all new brand, sell those as they see fit. Provided they aren't really just rebranded VWs (another version of the same product). Since this is an all new product that no dealer sells, new brand, it would be reasonable to allow this to be directly sold.

But I think this will be a very tough fight, and they will lose many of the state battles.

It will be interesting, and not a surprise I'm sure. Probably not an issue to use parts from another manufacturer. Seems like any financial connections, shared services, and/or any technical and design connections will likely be the core arguments. Never that great when politicians and/or lawyers get involved in the Free Market. But then I would see this differently if I were a VW Dealership. We are blessed to be well enough off that we can worry about things like this.

 

[TimmyHil08]

Scout had to have known this was gonna happen. They recently hired a bunch of lawyers just last February. Im sure VW has worked out a plan with Scout to fight it.

Let’s remember that Scout Motors is a totally new platform and an Independent American Company. That has access to the VW parts bin but they cant use it because the new platform doesn’t fit anything they have to offer.

Scout will most likely win.

Rivian and Lucid both had to fight lawsuits over their D2C platform/sales model. They won by acquiring a license to sell in states that wouldn’t allow it. Everyone can look it up if you don't believe me.