Calif. state dealers association sends cease-and-desist to Scout Motors

The California New Car Dealers Association (CNCDA) has sent a cease-and-desist letter to Volkswagen and electric vehicle startup Scout Motors over the two companies’ plan to sell vehicles directly to consumers.

Driving the news: The National Automobile Dealers Association (NADA) and CNCDA say that Scout’s direct-to-consumer strategy violates state law.

• The two associations argue that Scout Motors is an affiliate of Volkswagen under California law, preventing it from competing with franchise dealers.

• Scout is currently taking $100 reservations for its EVs, set to go on sale sometime in 2027. The NADA and CNCDA have threatened to “take further action” if the automaker fails to end direct sales.

Zooming in: While Volkswagen owns the Scout brand and helped fund the construction of its South Carolina factory, the company has said the EV label will remain independent.

• In a statement, Scout Motors also argued that it maintains sole responsibility for everything ranging from vehicle design to production.

• The EV startup currently plans to launch up to 100 retail centers in 16 U.S. markets, four of which are located in California. The state currently has 50 Volkswagen dealerships.

Looking ahead: Neither Volkswagen nor Scout appears ready to give up their direct-to-consumer strategy. The NADA has promised to resist the two companies in any state where franchise law protects dealers from competition with manufacturers.

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