The California New Car Dealers Association (CNCDA) is taking a stand against Volkswagen’s plan to sell its Scout-branded vehicles directly to consumers, issuing a cease-and-desist letter that calls the move a violation of state franchise laws. In today’s episode of CBT Now, Brian Maas, President of the CNCDA, discusses why this decision could set a concerning precedent for dealer-manufacturer relationships and the automotive retail industry at large.
In response to Volkswagen’s announcement to sell Scout vehicles directly to consumers, the CNCDA filed a cease-and-desist letter, citing violations of California’s strengthened franchise laws. The issue stems from Volkswagen’s decision to establish Scout as an affiliate brand and bypass its existing franchise dealers, including those who are eager to sell the Scout SUV and pickup models.
Maas stressed that the 2023 updates to California’s franchise laws were designed specifically to prevent anti-competitive practices like these. He noted that Scout was involved in the legislative process and had even opposed the bill, which ultimately passed unanimously.
Despite this, Scout announced its direct-to-consumer sales strategy in October, leaving dealers and regulators questioning the rationale behind the move.
However, the impact of this decision extends beyond California, as other states with similar franchise protections may follow suit in challenging Scout’s approach. Maas notes that the practical implications, including complications with vehicle recalls and maintenance, have yet to be addressed by Volkswagen. He also criticized the move as short-sighted, arguing that franchise dealers are well-equipped and enthusiastic about selling the new Scout models.
Volkswagen’s actions have drawn comparisons to Tesla’s direct sales model, but Maas dismissed the analogy, pointing out that Tesla operates without franchise dealers, unlike Volkswagen, which relies on an established dealer network.
“We strengthened our franchise law in California in 2023. And one of the major provisions was beefing up our anti-competition statute. Scout engaged in the bill as it moved through the legislature. In fact, we took some amendments at their request." – Brian Maas.
