Plan To Sell Scout Vehicles Directly To The Public Has California Volkswagen Dealers Hopping Mad

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Volkswagen is transferring ahead with plans to start manufacturing an entire new class of automobiles beneath the Scout Motors model. Scout was initially a sub-brand of Worldwide Harvester, with all of the technological sophistication that identify implies. The corporate began as a producer of farming tools and equipment, which implies its merchandise have been robust and rugged however regarded like they have been created by individuals who designed tractors and combines for a residing. That isn’t a knock on these unique automobiles, whose market was not nation membership installers however farmers and individuals who wanted automobiles that have been as capable off road as on.

There was a motion within the early ’60s towards such off-road succesful machines. Ford introduced the primary Bronco to market and it was a troublesome as nails backwoods basher. Chevy countered with the unique Blazer. All of them have been designed to counter the recognition of the Jeep and the factor all of them had in widespread was four-wheel drive and a switch case that allowed the driving force to pick between high-range and low-range operation. In low-range, the pretty modest four-cylinder engines have been able to ripping tree stumps out of the bottom on demand.

scout electric vehicles south carolina — Credit score: Scout Motors

All of them have been utilitarian within the excessive, with vinyl seats, rubber ground mats, and painted dashboards. After a tough day on the farm or out within the woods, you may wash the muck and mire out with a hose. They weren’t meant to be waxed, they have been meant to work lengthy hours with no complaints. That sort of inherent ruggedness is what Volkswagen hopes to recapture with its new Scout-branded automobiles.

The unique plan was to make two fashions, a pickup truck and an SUV, each of which might be powered by batteries. However not too long ago the corporate has introduced it can additionally provide range-extender engines to calm the fears of those that fear about working out of battery cost with out an EV charger — or {an electrical} outlet — close by. One other a part of the plan was to promote the brand new Scout automobiles on to clients on-line the way in which Tesla does. That second half doesn’t sit properly with Volkswagen sellers within the US.

California Sellers Problem Direct Gross sales Mannequin

In California, the sellers have employed authorized counsel who’ve fired a warning shot throughout the bow of the father or mother firm by sending a strongly worded cease and desist letter to the Volkswagen authorized group. Stop and desist letters are how attorneys threaten one another’s purchasers with out the expense and aggravation of truly submitting go well with. Autoblog experiences that the California New Automotive Sellers Affiliation claims the direct gross sales technique violates a 2023 modification to California’s State Car Code which prevents automakers and their associates from bypassing their franchise dealerships. Right here is the related a part of that letter:

Beneath Car Code part 11713.3(o), vehicle producers and their associates are forbidden from competing with their very own automobile franchisees. Scout is an affiliate of VW beneath California legislation. Car Code part 11713.3(z) defines ‘affiliate’ as “a person who directly oindirectly through one or more intermediaries, controls, is controlled by, or is under commonb control with, another person.” Since as early as 2022, VW has been instantly band substantively concerned in Scout’s improvement and revitalization of its automobiles, together with VW’s funding of billions of {dollars} right into a Scout manufacturing plant in South Carolina.

The letter goes on to elucidate a few of the background that preceded the passage of that part of the automobile code by the California legislature:

As background, Car Code part 11713.3(o) was amended in 2023 by Meeting Invoice 473 to ban automakers like VW from establishing affiliate manufacturers to compete with sellers by instantly promoting automobiles. Scout was lively all through the legislative course of, and the legislature adopted amendments in response to a few of Scout’s arguments. On April 24, 2023, the California Meeting Committee on Transportation wrote:

“Scout Motors is opposing (AB 473), arguing the anti-competition language within the invoice ‘would serve to prohibit Scout Motors (…) from using newly appointed (independent) dealers, using existing independent dealers, or selling direct to California (residents.)’ To deal with this concern the creator amended the invoice to allow competitors as long as the automobile is being bought utilizing new or present franchisees to promote and repair these automobiles.

“(AB 473) would nonetheless prohibit Scout Motors or any new automobile line from a producer with a dealership community in California from being bought on to bconsumers. Volkswagen, the father or mother firm of Scout Motors, may promote Scout automobiles within the state in the event that they promote them at any of their different automobile line firm’s bdealerships like Volkswagen, Audi, Porsche, Bentley or Lamborghini. Volkswagen Group may additionally create a brand new franchise community for Scout Motors if they need tonkeep a separate model distinct from their different fashions. This provision wouldn’t have an effect on Tesla, which doesn’t have a dealership community to instantly compete in opposition to.

After the AB 473’s language was finalized, Mr. Sitron (Scout’s Normal Counsel) acknowledged that the legislation would prohibit Scout from promoting Scout automobiles on to California shoppers: “AB 473, as amended, could effectively prohibit Scout Motors (or any other new to-the market manufacturer seeking to introduce new EV line-makes) from entering the California market. Under this language, a new-to-the-market manufacturer with new and innovative EVs would be statutorily banned from deciding its distribution model in California, potentially killing off any reasonable opportunity to operate in the state.”

Scout Says It Is Impartial

Scout Motors has argued that it operates independently from Volkswagena declare it says is central to its direct gross sales plan. The CNCDA disputes this, citing Volkswagen’s monetary and operational involvement, together with funding Scout’s new manufacturing facility in South Carolina. These connections, the affiliation contends, make Scout an affiliate of Volkswagen slightly than an impartial startup like Tesla. An important distinction could also be that Tesla is grandfathered within the 2023 modification to the California legislation whereas Scout Motors isn’t. As well as, Tesla had no present automobile manufacturing operation when it started promoting electrical vehicles.

The piety of the brand new automobile sellers is questioned by Carscoopswhich experiences one Volkswagen supplier within the Golden State has slapped a $35,000 “market adjustment” on a Volkswagen ID. Buzz it has in inventory. It’s laborious to be sanctimonious if you find yourself appearing like a jerk in public. One of many the explanation why Volkswagen desires to promote Scout automobiles on to clients is as a result of many individuals would like a root canal to arm wrestling with a supplier. That antipathy to the normal supplier expertise is why Hyundai has elected to start promoting its vehicles in chosen markets by way of Amazon. Hyundai sellers are nonetheless a part of the gross sales course of, however the pricing is finished on-line. That method, the same old haggling is eradicated, which is able to please many individuals however not those that assume they’ll stroll right into a dealership each two or three years and do a greater job of negotiating than those that do it for a residing day by day.

Placing the authorized shenanigans apart, we right here at CleanTechnica intergalactic headquarters must surprise how distinct the Scout automobiles shall be. Are they being constructed on a brand new platform or on a model of the present MEB platform or upcoming SSP platform? Will they use batteries which are materially completely different from what Volkswagen Group makes use of in its different electrical fashions? And can they use completely different software program than different vehicles from the group? If the reply to these questions is “no,” it’s laborious to see how Volkswagen can help its declare that Scout Motors is a “new to the market” producer. There have already been hints that the brand new software program partnership with Rivian may affect the design of the software program package deal that shall be included into Scout automobiles. We don’t usually have good issues to say about sellers, but it surely appears they’ve a authentic criticism, no less than in California.

Sellers in different states are getting ready to hitch the battle as properly. Mike Stanton, the CEO of the Nationwide Vehicle Sellers Affiliation (NADA), has stated his affiliation is able to problem Scout “in courthouses and statehouses across the country.” He predicts that Scout’s plans to handle each facet of the possession expertise by way of its app “will fail.” Daniel Crane, a professor on the College of Michigan Regulation Faculty thinks supplier associations will choose states the place they’re the strongest to push again in opposition to the direct-to-consumer gross sales technique.

Scout automobiles is not going to even be on the market for a number of years. The manufacturing unit is beneath building and testing of prototypes has barely begun. Challenges to supplier franchise legal guidelines have been happening since Tesla first started promoting the Mannequin S on-line in 2012. Even Tesla has but to win the appropriate to promote on to shoppers in a number of states, together with its dwelling state of Texas. What Volkswagen is doing is a thumb within the eye to its US sellers, who’ve been clamoring for extra fashions to promote — particularly a pickup truck — for years. It has been skinny occasions for Volkswagen sellers in America for a number of years, and proper when the corporate has some thrilling new fashions within the pipeline, it desires to chop its long-suffering sellers out of the loop.

Is pushing for direct gross sales the appropriate path for Scout Motors and Volkswagen or a poorly thought out technique that’s doomed to fail? We might love to listen to what our readers must say on that query.