California New Car Dealers Association sues Scout Motors and VW

According to the suit, VW and Scout Motors are operating in direct violation of California Assembly Bill 473. (4 min. read)

Author

Marcus Amick
April 24, 2025

It’s clear not everyone is a fan of the iconic Scout brand’s comeback route, specifically those in the biz of retailing Volkswagen products. 

The details: The California New Car Dealers Association (CNCDA) filed a lawsuit Wednesday in San Diego County Superior Court against VW and its affiliate, Scout Motors, due to claims the two companies are deliberately violating state franchise laws—as part of their direct-to-consumer sales model for the Scout Traveler SUV and Terra pickup. 

  • According to the suit, VW 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. 

  • 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, contends CNCDA.

Worth noting: The lawsuit specifically alleges that VW and Scout Motors are engaging in “unfair competition” and “false advertising,” and CNCDA is seeking to immediately stop Scout Motors’ illegal direct sales, as well as civil penalties that could reach $35 million or more.

Why it matters: With California being the end-all market for a brand like Scout Motors vying to make a major play in the EV game, the CNCDA lawsuit could signal some tough terrain ahead for the off-road brand. 

What they’re saying: “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,” Brian Maas, President of CNCDA told CDG News.

Brian Maas, President of CNCDA

Between the lines: Noting that the company doesn’t comment on active litigation, Scout Motors (when contacted) referred CDG News to a previous statement that details the reasoning behind its direct-to-consumer business model.   

  • “Franchised dealers may be appropriate for some brands and their customers, utilizing a direct sales model best supports our customers and our strategic customer-first vision,” the statement reads.

  • It continues, “We will establish a one-to-one relationship with our customers, rooted in trust and transparency, by selling and servicing Scout vehicles directly from Scout Motors”—with its own service operation.   

  • “From the start, customers will know what they are paying and can expect full price transparency. Vehicle purchases will be completed in minutes, not hours.”

A rep for Volkswagen America—when contacted by CDG about the lawsuit—responded, “Scout Motors is a different company from Volkswagen Group of America.” 

Firing back: “Regardless of how adamant Volkswagen is that Scout Motors can circumvent their dealers, California law remains…Bypassing their dealers is not only illegal in California, but frankly, it’s irresponsible. VW dealers have been demanding VW to provide trucks and SUVs—electric and non-electric—to offer their customers and for Volkswagen to save those models for their own profit is just not right,” added Mass.

Bottom line: The fact that CNCDA represents 45 VW dealerships in The Golden State that can make or break a car brand makes it impossible for Volkswagen to simply hope to ride out the claims (even if the courts were to rule in their favor). Hmm…wonder if a few Scout allocations would help ease some of the tension, even if it was under some sort of exclusive direct/retail hybrid business model for select VW stores.

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