The Volkswagen Group and its new Scout electric vehicle brand have faced criticism from the current dealerships associated with the automaker in California regarding the state’s franchise laws.
California dealers, recognized for being at the forefront of electric vehicle initiatives, are displeased with VW Group’s intention to adopt a direct-sales approach for its recently launched Scout brand, particularly concerning the newly introduced Terra pickup truck and Traveler SUV, which are slated to begin production in 2027.
Scout Terra concept
As initially reported by Automotive News, the California New Car Dealers Association issued a cease-and-desist letter to VW Group and Scout on December 20, raising concerns about the intent to sell Scout vehicles directly to consumers in California.
This dealer association, representing over 1,200 dealerships statewide—including more than 50 for VW Group—contends that state franchise laws forbid manufacturers from competing with their franchisees through direct sales or service operations. According to California law, Scout is viewed as an affiliate of VW Group.
Scout Traveler concept
The dealership association argues that if VW Group follows through with the direct-sales strategy, it would disadvantage both new and established VW Group dealerships—many of which have long sought a pickup from the manufacturer—by restricting their ability to sell and service Scout vehicles.
Several automakers like Tesla, Rivian, and Lucid are already managing their own retail outlets in California. However, these brands are not directly linked to a major manufacturer—although this is starting to change with Rivian, following VW Group’s significant $5.8 billion investment pledge made earlier this year.
Polestar, which is associated with Volvo, operates a direct-sales model in California but has successfully found a compromise by incorporating elements of customer service—along with actual service—through Volvo dealerships. A similar strategy may have alleviated some concerns about VW Group’s plans to launch its own stores for Scout.
Working alongside existing dealerships could bring benefits, especially in terms of service, as it removes the necessity for establishing new infrastructure. Rivian CEO RJ Scaringe has previously criticized dealer franchise regulations as being “as close as you can get to corruption” during a media roundtable, admitting that his company is grappling with a service backlog while striving to expand its service network.
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