Volkswagen and its affiliate Scout Motors are facing another legal challenge to plans to sell Scout vehicles direct to consumers, bypassing Volkswagen dealers. This one from the California New Car Dealers Association (CNCDA). Last week, CNCDA filed a lawsuit in San Diego County Superior Court against Volkswagen and Scout Motors for what it calls "deliberately violating California’s franchise laws". The group alleges "that Volkswagen is illegally competing with its dealer partners through its affiliate, Scout Motors."
It's the second lawsuit filed by unhappy VW dealers. As reported by Automotive News, in February, a large group of Audi and VW dealers in Florida filed what's believed to be the first lawsuit against Scout Motors over its direct-to-consumer sales model.
The legal challenges stem from Volkswagen Group's announcement last fall that it would make Scout a stand-alone brand and take the direct-to-consumer sales route instead of utilizing its VW dealers. You can read Car Pro Show host Jerry Reynolds' commentary on the matter here.
In a press release announcing its recent lawsuit, CNCDA alleges that "Volkswagen and Scout Motors are operating in direct violation of California Assembly Bill 473, a 2023 law that prohibits automakers from using affiliated brands to compete with their own franchised dealers. The suit alleges that despite admitting to legislative leaders that AB 473 would cut off its ability to sell directly to consumers, Volkswagen, via Scout Motors, has taken deposits and is marketing Scout-branded vehicles to California consumers."
“While CNCDA represents 45 Volkswagen dealerships in California, this lawsuit sends a message to every automaker,” said Brian Maas, CNCDA President. “VW dealers would welcome the opportunity to sell Scout trucks and SUVs, but their manufacturer business partner is denying them that opportunity, in direct violation of California law. Volkswagen can’t pick and choose which vehicles to sell on its own or through its franchised dealer network, reserving the most profitable or desirable vehicles for itself. Illegal competition will harm not only dealers but also the communities and car buyers that they serve. That is why the Legislature unanimously approved this important law.”
CNCDA continues saying that its lawsuit "alleges unfair competition and false advertising, and CNCDA is seeking to immediately stop Scout Motors’ illegal direct sales, as well as civil penalties that could exceed $35 million."
CNCDA says California’s franchised dealers are key economic drivers, employing over 135,000 Californians and generating more than $8 billion in tax revenue for state and local governments. It also notes they also donated almost $71 million to charitable organizations in 2024 alone. CNCDA says it is committed to protecting the laws that ensure fair competition and a level playing field for all.
You can read the CNCDA filed complaint here.
For its part, the National Automobile Dealers Association (NADA) is also trying to get Volkswagen Group to change its mind. According to another Automotive News report, last month NADA sent a letter to the Volkswagen Group CEO and other board members asking them to reconsider a Scout direct-sales model.
Photo: Scout Motors.