According to foreign media reports, Scout Motors, a subsidiary of the Volkswagen Group, submitted a request to the U.S. government, urging the United States to take all necessary measures to repeal the automobile franchise laws of each state. The company sees these laws as “onerous restrictions on competition” and hopes to pave the way for its direct sale of cars to consumers with this move.
Image credit: Scout Motors
The request was submitted by Blair Anderson, vice president of government and regulatory affairs at Scout Motors, who submitted the request to the U.S. Department of Justice’s Anti-Competition Regulations Task Force in an 11-page letter. It is reported that the working group was established in March this year, and US President Donald Trump signed two executive orders in January and February this year aimed at reducing the “regulatory burden on the American people”.
Scout Motors plans to sell Terra pickups and Traveler SUVs through experience centers, fast transactions, stores in major U.S. markets, and a flexible service network across the United States, after it goes into production in the United States in 2027. Scout Motors announced the two non-load-bearing light truck architecture models in October last year and confirmed that it will sell vehicles directly to consumers, bypassing the traditional dealer system and Volkswagen Group’s own dealer network. It is reported that Volkswagen Group dealers have long called for an increase in the supply of pickup trucks and SUVs. Currently Scout Motors is led by Scott Keogh, former CEO of Volkswagen Group America and president of Audi America.
“Outdated state auto franchise laws — enacted decades ago in response to the situation at the time — have evolved into a legal umbrella for existing franchise networks, preventing other business models from existing, let alone competing with existing franchise networks,” Blair Anderson said in a May 23 letter. ”
In his letter, Blair Anderson bluntly stated that existing and pending state auto dealer franchise laws threaten Scout Motors’ ability to sell and repair vehicles in all 50 states in the United States.
Blair Anderson claims that no industry in the U.S. economy has more anticompetitive laws that hinder innovation, economic growth, and consumer welfare than the U.S. automotive industry and state dealer franchise laws. “We urge the U.S. Department of Justice and the Trump administration to investigate and thoroughly investigate these protectionist and anticompetitive tactics and open up a level playing field and innovation to the U.S. automotive industry,” he wrote. These strategies are in direct conflict with the possibility of a free and open market, where all businesses can compete fairly. ”
Blair Anderson pointed out that it makes no sense to force an emerging manufacturer to adopt a dealership franchise model in the initial stages, especially when the manufacturer has never asked any dealer to invest money in its vehicle distribution, has developed more efficient alternatives, and will not sell similar models already available to the franchisee.
In response to the above reports, Scout Motors declined to comment further.
State auto franchise laws in the United States have quickly become a legal obstacle for Scout Motors. In February, a bill in South Carolina, USA, failed to pass, which was supposed to allow Scout Motors to work with the United StatesElectric vehicleManufacturers Tesla, Rivian and Lucid sell cars directly to consumers.
Also happening in February this year, a large number of Volkswagen and Audi dealerships in Florida, USA, filed a lawsuit in an attempt to block Scout’s direct sales retail model, alleging that the company’s reservation system violated state law. The dealers claim in the complaint that Scout Motors should be banned from accepting vehicle reservations in Florida and that the brand should be banned from operating in the state because there is no manufacturer’s license. It is reported that on October 24, 2024, Scout Motors will begin accepting a $100 refundable deposit for Traveler SUVs and Terra pickups. However, the dealer said that this deposit can be used to offset the official purchase price, which is essentially equivalent to a deposit.
In April, the California New Car Dealers Association filed a similar lawsuit against Scout Motors, Volkswagen Group, Volkswagen America, and Volkswagen Group America.
The National Association of Automobile Dealers (NADA) has vowed to block manufacturers’ plans to sell cars directly to consumers and has challenged such efforts in courts and state capitols. In March, NADA sent a letter to Volkswagen Group CEO Oliver Blume and other senior executives, urging the Volkswagen Group to change its strategy. As of July 16, NADA has not received a response.
“Licensed auto dealers and their protection laws enhance the competitiveness of the U.S. new car market and benefit consumers,” Daniel Ingber, NADA’s senior vice president of regulatory affairs, wrote in a letter submitted to the U.S. Department of Justice in May. Despite anonymous attacks on the franchise system, all empirical evidence points to a positive effect. ”
In defense of the direct sales model, Volkswagen Group and Scout Motors insist that the Scout truck brand is independent and autonomous, but this claim has been questioned by dealers.
In April this year, when briefly mentioning Scout Motors at the New York Auto Forum, Bernie Moreno, a Republican senator from Ohio and a former car dealer, said: “Frankly, I really don’t understand the current situation, the dealer franchise model originally worked well and was beneficial to both parties. Bernie Moreno said he was optimistic about Scout Motors adjusting its direction.