The new Scout Motors brand backed by Volkswagen can’t sell cars in its home state. That’s because its headquarters is located in South Carolina, one of several states with an outright ban on direct-to-consumer automobile sales. In fact, South Carolina is especially aggressive in that it also banned manufacturer-owned service centers. The direct-to-consumer model is popular with EV startup brands like Tesla, Rivian, and Lucid, and it’s the model Scout is planning to use to sell its electric and hybrid trucks and SUVs.
Scout Motors wants to create a legal landscape more favorable to this increasingly popular car sales model, but it’s being met with legal pushback. A group of VW and Audi dealerships in Florida is alleging Scout Motors of violating state law with its reservation system.
Direct-to-consumer car sales are legal in Florida; there are a couple dozen Tesla stores in the Sunshine State. However, the potential problem is with Scout’s status as an independent brand 30 percent owned by Volkswagen. Florida law says that’s enough to make it a “common entity” of VW. If Scout is a common entity of VW, then it cannot sell cars directly to consumers like Telsa and Rivian, which have no franchised dealers.
The Florida lawsuit claims a manufacturer or one of its common entities “may not compete with its franchised dealer network by offering any brand of new motor vehicle for sale to Florida consumers other than through a licensed dealer,” the suit says.
“In Florida, taking a deposit is defined as conducting a sale,” John Forehand, one of the lawyers representing the dealers, told Automotive News. This was in reference to Scout’s $100 refundable reservations for the Traveler and Terra, which can be used to offset the purchase price.
The main argument against the direct-to-consumer model is that it could lead the automakers to raise their own prices without competing dealers keeping them in check. The more traditional franchise dealership model is more competitive; dealer networks can’t as easily get away with price gouging when the same vehicles are available from different dealers. For these VW and Audi dealers, they would probably much rather have those trendy trucks and SUVs in their showrooms than compete with them.
The argument in favor of direct-to-consumer sales is that it provides a smoother, better experience for the buyer, largely through modern technologies. Scout’s vision for its ownership experience is to buy the car with an app and use that same app to schedule service, update the car’s software, and perform functions like remote start. There’s also a free market argument to be made for removing a state’s requirement to have a middleman between the manufacturer and the buyer.
Comments
I can’t think of any time I or anyone I know said they loved the auto dealer experience. Maybe it’s time to rethink this setup?
At least half of the customer experience, for dealers, needs rethinking as well.
The laws in some states that require the dealer to sale the vehicles are archaic. If I were in the market for a vehicle made by a manufacturer that did this, I’d be willing to fly or drive just the skip the miserable experience at the dealership (salesperson/sales manager/paper pusher=extended warranties etc etc/& if financing the finance guy/gal). I’m 65 & the only satisfaction I ever get a dealer is, when out just enjoying the weather, will drive slowly through a dealership, & always veer away from the sales people coming out the door, or the ones following around on a golf cart.
They are suing because they still want to screw us the customers!
If you were screwed by a dealer, it’s because you didn’t get up and leave. If you do business with someone you don’t like, you just make it easier for them on the next deal.
Dealerships will be the downfall of Legacy Automakers if, and it is a HUGE if startups can become profitable and better at manufacturing. Legacy cannot afford to have a bunch of Teslas selling millions of vehicles in the NA Market.
I have always been of the opinion that ALL Legacy Automakers need to band together and take all these insane and old laws all the way to the Supreme Court.
Not saying that Dealerships should not exist but they need their power brought down hundreds of pegs if not more!!!
If the dealers win and require dealer distribution Scout ought to cut out these VW dealers anyway and go through International dealers just to spite them. Plus would be historically correct
Interesting read! It’ll be fascinating to see how Scout Motors navigates these legal challenges and what impact this has on the direct sales model in the automotive industry.
Dealerships keep fighting these Direct to customer sales NOT because they are startups and they are trying to protect themselves long term, they are doing it because ALL the new Direct to customer automakers have one thing in common, they all sell BEV’s
Dealerships are desperate to kill them. They make almost NO money and want nothing to do with them.
Makes you wonder why EV’s have become Sooooo politicized in this Country for absolutely NO reason at all.
EVs have become politicized because of regulations (that ICE can’t meet) and essentially mandates to kill off other options (ICE). Forcing people into one option by using the government to do so IS political.
VW could spin off Scout or just sell Scouts at VW or Porsche/Audi dealers. Or, as Ryan suggested above, set up Scout dealerships. While I’ve had some fun wheeling and dealing with car dealers along with some bad times doing so, I can’t say I’d be sorry to see the dealerships go away.
I have a local dealer that I have been dealing with for 30 years……They have always been great to work with from sale to service. More than once they have bent over backwards to help me out in a pinch, and as my daughters began driving we had a specific service writer that we worked with who would hand hold them through repair processes and make them feel comfortable with the process. The family owned the dealership for over 100 years and just this fall sold out to an ownership group……..we will see how it goes.
I would love to have a Scout…….if it was an International and ICE….have had a number of them in the past…..long live the corn binder.
@WAB
Get the Range extender EREV version
I have had a similar experience except it has been since September 1976 with my Buick/GMC dealer. I speak with the general manager for the new car price and the owner gives me the trade in value. Very smooth and very friendly. One of the sale personnel handles the transaction and gets the credit for the sale. I write out a check and am off with a very big smile. Often the dealer has a vehicle on the way spec’d out the way my wife and I like it and offers that to us if we are interested which we usually are!
Getting back to Scout…how long before they disappear like a lot of small EV makers even with VW behind them?
Lj4 Ice vehicles pay taxes when u gas up. EVs don’t. Gas taxes pay for road repairs.
California is rolling out a program where EVS are charged road tax by the miles that they are driven.
Tax the frack out of those little pryck vehicles.
Scout? Wasn’t there a vehicle similar to a Bronco or a Jeep that was manufactured by International Harvester back in the 1960’s or 1970’s named “Scout”?
I am interesting in the Scout Terra but this give me pause “Scout’s vision for its ownership experience is to buy the car with an app…” Huh? If the process involves forcing me to use my phone to purchase the vehicle and have it function, then I don’t care if it is sold directly or through a dealer, I won’t buy it. Why are auto manufacturers getting weirder? Why are they making simple things more complicated?