The California New Car Dealers Association (CNCDA) has filed a lawsuit against Volkswagen and Scout Motors. CNCDA President Brian Maas joins us in today’s Inside Automotive episode to share the details.
Scout Motors, a newly formed brand under Volkswagen Group, is at the center of the lawsuit. Scout is attempting to bypass the traditional franchise model and sell its vehicles directly to customers. However, because the company is a direct affiliate of automaker Volkswagen, which operates an expansive franchise dealer network, CNCDA argues that such direct-to-consumer sales violate California’s dealer franchise laws.
Maas brings to light a troubling situation. When amendments were made to franchise laws in 2023, Volkswagen and Scout requested a veto from the governor. Volkswagen’s legal counsel argued that direct sales would be prohibited under the new legislation. Then, in October 2024, they announced they’d sell directly to consumers and began taking customer reservations.
The CNCDA also sued Volkswagen and Scout for false advertising, a costly penalty that could incur a $2,500 fine per violation. The total penalty could quickly snowball into millions of dollars, depending on California’s number of Scout reservations.
However, Volkswagen contends that Scout is a new and independent company. Maas points out that Scout has deep legacy ties. Originally a product of International Harvester–acquired by VW–the Scout name is far from new, and the company’s relaunch under Volkswagen’s oversight does not make it an unaffiliated brand.
“If Scout and VW can get away with this, what about Sony Honda? What about some other OEM trying to do something similar?” – Brian Maas
Maas highlights that this case is not just about one brand or one manufacturer; it’s about preserving the integrity of the franchise system. The system has served OEMS, customers, and dealers well for decades by promoting fair competition, local jobs, and accessible service networks. EV startups like VinFast and Polestar initially launched with direct sales strategies, but eventually pivoted toward a franchise model, acknowledging the power and value it provides.
Maas stresses that the CNCDA is taking a stand for all dealers, not just Volkswagen, Audi, and Porsche. They’ve garnered strong support from the National Automobile Dealers Association (NADA), other state associations, and the Volkswagen dealer body. The outcome of this lawsuit is critical and will have far-reaching consequences. If Scout is successful and allowed to circumvent franchise protections, it could open the floodgates for other OEMS to attempt similar workarounds, potentially undermining the foundation of the dealer network system.
