VW dealers and NADA to fight Scout Motors in court

Last week, Scout Motors angered VW dealers across the United States by confirming that the upcoming Terra and Traveler would be sold through a direct sales model rather than through existing dealers. However, state dealer associations and the National Automobile Dealers Association (NADA) have begun fighting back and looking for ways to block the controversial plan to revive the brand.

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Although Tesla is a pioneer in direct-to-customer sales in the United States, it faces many legal obstacles in circumventing regulations designed to protect franchised dealers. Scout differs from Tesla in that it is not a true startup but is owned by the Volkswagen Group. Richard Sox, managing partner at law firm Bass Sox Mercer, said the company’s relationship with the German automaker could hamper its ability to sell vehicles without involving dealers becomes complicated.

READ: VW dealers furious over Scout selling Terra and Traveller directly to consumers

“In the vast majority of states, OEMs are not allowed to sell directly or compete with dealers,” Sox said. automotive news. “There are some exceptions, but those exceptions generally have to do with non-traditional OEMs that don’t have and have never had a dealer network, like Tesla. They’re affiliated with Scout, they have ownership. They may have some control. That’s This certainly complicates Scout’s ability to sell directly in these specific states, which would otherwise allow manufacturers to do so completely independent of traditional OEMs.”

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Scout has been eager to declare independence since its launch. The company plans to build dedicated retail spaces across the country that will allow shoppers to place orders online. Scout will also manage all production and maintenance of its vehicles.

Geoffrey Pohanka, chairman of Pohanka Automotive Group, rejected claims that Scout is independent from Volkswagen, telling Automotive News “the two are the same.” He added: “Volkswagen has been trying to regain a foothold in the United States and they are very sincere about it. This contradicts all the efforts they have made to reinvigorate the brand with new models.”

NADA CEO Mike Stanton said the association is ready to challenge Scout “in courts across the country and in state capitols.” While it’s unclear what legal path NADA will take, Stanton noted that “everything is now on the table.” He predicted that Scout’s plan to manage every aspect of the ownership experience through its app “is going to fail.”

Read: These are the new Scout Terra trucks and Traveler SUVs

Daniel Crane, a professor at the University of Michigan Law School, believes dealer associations may first choose states with the strongest positions before starting legal battles. Richard Sox added that his law firm has begun working with 10 state dealer associations to find the best way to resist direct-to-consumer sales tactics.

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