On the latest episode of Inside Automotive, Fred Emich IV, managing partner at Emich Automotive and chairman of the Volkswagen National Dealer Council, joins us to elaborate on his take of Colorado’s decision to grant Scout Motors a dealer license, which highlights a growing threat to the U.S. franchise system and creates uncertainty for legacy automakers’ dealer networks and setting a precedent other manufacturers could follow.
As a fourth-generation car dealer, Emich explains that the ruling reflects ambiguities in state law around same-line manufacturers and affiliates, allowing a Volkswagen-owned subsidiary to pursue direct sales. He warns the decision could weaken franchise protections nationwide as automakers explore similar structures.
Industry implications
The ruling, approved in a 6-2 vote, was issued by the Colorado dealer licensing board, which was tasked with interpreting how state law defines same-line manufacturing and affiliated entities. Emich notes that the board struggled to separate statutory language from the practical realities of franchise relationships, particularly given Scout’s ownership structure and its connection to Volkswagen’s existing dealer network.
Despite the presence of franchise dealers on the board, Emich described the outcome as unpredictable and said it underscores how ambiguous language in dealer statutes can produce far-reaching consequences.
However, he warns that the decision threatens more than just Volkswagen dealers. Emich said manufacturers across the industry are closely watching how the situation unfolds, noting that other automakers could replicate the model by creating separate entities to sell vehicles outside the traditional franchise system.
Impact on VW dealers
The issue is especially sensitive for Volkswagen dealers, who have faced performance challenges in recent years. Emich said dealers have long asked for a rugged truck or off-road vehicle to strengthen their lineup, making Scout Motors’ exclusion from the franchise network particularly frustrating. He added that the move has strained dealers’ confidence.
Although Scout Motors’ license is temporary and must be renewed annually, the current authorization expires in October. The ruling allows Scout to continue accepting vehicle deposits, which had already been a point of contention. Emich noted uncertainty about whether Scout will be operationally ready to sell vehicles by the time the license comes up for renewal.
In response, the Colorado Automobile Dealers Association (CADA) is reviewing potential legislative changes to clarify the definition of affiliates and same-line manufacturers under state law. Emich said dealers are focused on closing loopholes that could allow automakers to bypass franchise agreements by shifting sales to affiliated entities. Any legal challenge, he said, would likely be pursued at the state level with support from dealer associations.
Borader impications
Moreover, Emich stresses that the decision in Colorado could have national implications, but emphasized that each state presents its own regulatory landscape. He notes that manufacturers would need to navigate dealer laws on a state-by-state basis if they pursue similar strategies. He also suggested that Colorado’s strong political push toward EV adoption may have influenced the outcome.
On the other hand, consumer perception remains a challenge for dealers defending the franchise system. Emich acknowledged that public support is often limited, in part due to past dealer practices and inconsistent customer experiences. While many retailers have improved, he said uneven performance across the industry continues to shape negative perceptions.
“I’ve also seen statistics that show 98% of people want to go into a dealership and buy a car.”
Outside the regulatory debate, Emich said Emich Automotive experienced a strong but volatile year. The group saw significant gains in Q3, driven by EV sales, with its Denver Volkswagen store posting record volume. Demand for EVs surged late in the summer, pushing sales into the final months of the year and driving rapid inventory turnover.
Future outlook
Looking to 2026, Emich expects continued opportunity but also new headwinds. He cited tariffs affecting imported brands as a key concern, along with potential price increases and cost pressures from manufacturers. Colorado’s status as a major EV market will continue to influence the group’s sales and inventory strategies.
Emich also noted broader shifts in retail operations, including a growing willingness to sell higher-mileage used vehicles. He said vehicles that would once have been sent directly to auction are now staying on the front line longer, reflecting shifts in consumer demand and vehicle durability. As manufacturers test new sales models and states grapple with evolving dealer laws, Emich said adaptability will be critical for franchise dealers navigating an increasingly uncertain landscape.
