CA dealers scream foul play, try to block Scout’s direct-sales model

• A California dealer body has sent a cease-and-desist letter to VW Group and Scout
• The dealers argue that Scout’s plan to sell its upcoming electric pickup and SUV directly to customers flouts the state’s dealer franchise laws
• VW Group’s dealers have been requesting a pickup from the automaker for years

Volkswagen Group and its new Scout EV brand have drawn the ire of the automaker’s existing dealerships in California over the state’s dealer franchise laws.

Dealers in the state, known for being the most progressive when it comes to EVs, are unhappy that VW Group plans to implement a direct-sales model for the newly established Scout brand, whose recently revealed Terra pickup truck and Traveler SUV are set to go into production in 2027.

As first reported by Automotive News, the California New Car Dealers Association sent a cease-and-desist letter to VW Group and Scout on Dec. 20, addressing the plan to sell Scout vehicles directly to buyers in California.

The dealer body, representing more than 1,200 dealerships across the state—including over 50 for VW Group—argues that California dealer franchise laws prohibit automakers from competing with their own franchisees by using affiliates to directly sell or service vehicles, and that under California law, Scout is considered an affiliate of VW Group.

The dealer body claims that if the direct-sales plan proceeds, it will exclude new and existing VW Group dealerships—many of whom have long requested a pickup from the automaker—from the opportunity to sell and service Scout vehicles.

Automakers such as Tesla, Rivian, and Lucid already operate their own stores in California. However, none of those brands are directly linked to a major automaker—though that is beginning to change in Rivian’s case, following a $5.8 billion investment commitment from VW Group made earlier this year.

Polestar, which is linked to Volvo, operates a direct-sales model in California but has found a balance by integrating some level of customer service—and service itself—through Volvo dealerships. A similar approach might have helped ease tensions in VW Group’s efforts to establish its own stores for Scout.

Collaborating with existing dealerships can offer advantages, particularly in servicing, as it eliminates the need to build new infrastructure. Rivian CEO RJ Scaringe, who recently described dealer franchise laws as being as “close as you can get to corruption” during a media roundtable, acknowledged that his company faces a service backlog while attempting to expand its own service network.