Summary
- VW’s new Scout Motors EV brand plans to sell electric Terra pickup truck and Traveler SUV directly to customers, bypassing conventional dealerships
- California New Car Dealers Association threatens legal action against Scout Motors for violating franchise laws with direct-sales plan
- Existing automakers like Tesla, Rivian, and Lucid use either franchise or direct sales model, but not both
- Dealerships in California are upset over VW cutting them out of sales opportunities with direct sales
- Volvo’s Polestar model balances direct-sales with some level of service connected to dealerships and could have been a better approach for Scout
Article
Volkswagen Group’s new Scout Motors EV brand has faced backlash from franchised dealerships in California for planning to sell its upcoming Terra pickup truck and Traveler SUV through a direct-sales model. The California New Car Dealers Association has threatened legal action against Scout Motors, accusing the company of wrongfully cutting out VW dealers from the opportunity to sell the new vehicles. This move allegedly violates California’s franchise laws, which prohibit manufacturers from directly competing with their franchisees. The dealerships argue that VW can either have dealerships or direct sales, but not both, even if the sales models are separated by brand.
While California is known for its EV-friendly policies, the state’s franchised dealerships have been resistant to direct sales models. Scout Motors follows in the footsteps of electric vehicle brands like Tesla, Rivian, and Lucid, which have successfully navigated the direct-sales landscape in the past. Dealers have expressed concerns about the potential impact on their businesses, pointing to Tesla’s disruptive entry into the market over a decade ago. However, Scout Motors’ direct-sales approach is unique as it is still part of the VW Group, raising questions about the compatibility of dealership networks and direct sales strategies.
The dispute between Scout Motors and California dealerships highlights the challenges automakers face when trying to balance traditional dealerships with direct sales models. While Tesla, Rivian, and Lucid have embraced direct sales without aligning with franchised dealerships, Scout Motors’ affiliation with the VW Group complicates the situation. A potential middle ground could be found in Volvo’s Polestar brand, which operates as a direct-sales model with some connection to Volvo dealerships for customer service and repairs. This approach could have helped to alleviate tensions between Scout Motors and VW dealerships, who were taken by surprise by the company’s direct-sales announcement.
VW’s recent investment in Rivian adds another layer of complexity to the situation, as Scout Motors’ upcoming electric trucks are similar in format to Rivian’s existing vehicles. Rivian already has a network of company-owned showrooms in place, which gives it a competitive advantage in the direct sales arena. The lack of communication between VW and its dealerships has exacerbated the situation, with dealers feeling left out of the loop on the Scout brand’s development. This has led to increased tensions between VW and its dealers, as they compete for a share of the growing electric vehicle market.
The clash between Scout Motors and California dealerships underscores the evolving landscape of electric vehicle sales and the challenges faced by traditional automakers in adopting direct sales models. As EV brands like Tesla, Rivian, and Lucid continue to disrupt the market, established automakers like VW must find ways to navigate the shifting terrain of the industry. Finding a balance between traditional dealerships and direct sales models, as demonstrated by Volvo’s Polestar brand, may provide a roadmap for resolving conflicts and building relationships with dealerships. Ultimately, the success of Scout Motors and its direct-sales approach will depend on how it addresses the concerns of dealerships and navigates the complex regulatory environment of the automotive industry.
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