I recently wrote about the whole conundrum of the Ford Fathom likely costing over $30,000 because dealerships set their own prices. It’s been a big issue with new cars, which now average more than $50,000.
But the MSRP is just the beginning. There’s a destination fee, the monthly payments, and the dealership pricing. Well, unless you’re Scout Motors.
Or, well, unless Scout Motors gets its way.
Scout vs. California rages on
Volkswagen’s Scout Motors has a unique business plan for the United States: sell directly to customers. This means no dealerships.
CEO Scott Keogh said in 2024: “I don’t disagree with the dealer model, but there is a better path, and that’s exactly why we want to do it.”
This sounds like heaven to most Americans, who notoriously hate going to dealerships. Who wants to be pressured to add a bunch of stupid features you don’t want and then tricked into using their high-interest financing? I’m glad I only drive old cars and just go through Facebook Marketplace.
But the U.S. District Court for the Southern District of California doesn’t agree. Chief Judge Cynthia Bashant has denied Volkswagen and Scout Motors the motion to dismiss a California New Car Dealers Association lawsuit targeting their direct-to-customer sales plan.
The California New Car Dealers Association (LOSERS for short) filed the lawsuit in April 2025. This includes dealers under the Volkswagen Group of America, who argue that Scout is owned by Volkswagen and should therefore sell their cars through the dealerships.
The lawsuit states that the direct-to-consumer model violates the state’s law, which requires affiliated brands to use franchise dealers to sell their vehicles. It’s basically being viewed as Scout competing against Volkswagen’s existing franchises.
Interestingly enough, California is the only state to file this lawsuit against Scout. It’s a bit surprising, since California is usually so progressive. Well, not when it comes to cars, apparently.
Well, Scout was not deterred. It tried to dismiss the case again, but the court denied it. And then Scout tried again. And was denied again.
“We have beaten back two rounds of motions and will keep moving forward because California law needs enforcement. Undoubtedly, Volkswagen and Scout will continue to argue that they do not have to abide by it,” said Brian Maas, CNCDA President.
“There are nearly 650 franchised dealer owners in California, and every one of them has a stake in whether manufacturers can compete against their own business partners. Dealers will continue to fight for their right to offer all models to their customers.”
Scout is not the only automotive startup looking to go direct-to-consumer in the United States. Rivian is another. Right now, 96% of new vehicles are purchased through dealerships, and it seems tough to change that as courts continue to fight back against EV startups.
The current lawsuit seeks to enforce CNCDA’s Assembly Bill 473, which prohibits manufacturers from competing with their own franchised dealers. This will be running alongside the lawsuit filed in April at California’s New Motor Vehicle Board, made up of 14 California Volkswagen dealers.
