Plan To Promote Scout Automobiles Immediately To The Public Has California Volkswagen Sellers Hopping Mad

By Imran Last updated Dec 28, 2024

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Volkswagen is shifting ahead with plans to start manufacturing a complete new class of automobiles below the Scout Motors model. Scout was initially a sub-brand of Worldwide Harvester, with all of the technological sophistication that title implies. The corporate began as a producer of farming tools and equipment, which implies its merchandise had been powerful and rugged however appeared like they had been created by individuals who designed tractors and combines for a residing. That isn’t a knock on these authentic automobiles, whose market was not nation membership poseurs however farmers and individuals who wanted automobiles that had been as succesful off highway 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 had been designed to counter the recognition of the Jeep and the factor all of them had in frequent was four-wheel drive and a switch case that allowed the motive force to pick between high-range and low-range operation. In low-range, the pretty modest four-cylinder engines had been able to ripping tree stumps out of the bottom on demand.

All of them had been utilitarian within the excessive, with vinyl seats, rubber flooring mats, and painted dashboards. After a tough day on the farm or out within the woods, you possibly can wash the muck and mire out with a hose. They weren’t meant to be waxed, they had 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 should 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 nicely 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 mother or father firm by sending a strongly worded stop and desist letter to the Volkswagen authorized crew. Stop and desist letters are how legal professionals threaten one another’s shoppers with out the expense and aggravation of really submitting go well with. Autoblog reviews that the California New Automobile 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:

Below Car Code part 11713.3(o), vehicle producers and their associates are forbidden from competing with their very own car franchisees. Scout is an affiliate of VW below California regulation. Car Code part 11713.3(z) defines ‘affiliate’ as “an individual who immediately oindirectly by way of a number of intermediaries, controls, is managed by, or is below commonb management with, one other particular person.” Since as early as 2022, VW has been immediately band substantively concerned in Scout’s growth 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 number of the background that preceded the passage of that part of the car 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 immediately 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 ban Scout Motors […] from utilizing newly appointed [independent] sellers, utilizing current impartial sellers, or promoting direct to California [residents.]’ To deal with this concern the writer amended the invoice to allow competitors as long as the car is being offered utilizing new or current franchisees to promote and repair these automobiles.

“[AB 473] would nonetheless prohibit Scout Motors or any new car line from a producer with a dealership community in California from being offered on to bconsumers. Volkswagen, the mother or father firm of Scout Motors, might promote Scout automobiles within the state in the event that they promote them at any of their different car line firm’s bdealerships like Volkswagen, Audi, Porsche, Bentley or Lamborghini. Volkswagen Group might 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 immediately compete towards.

After the AB 473’s language was finalized, Mr. Sitron (Scout’s Normal Counsel) acknowledged that the regulation would prohibit Scout from promoting Scout automobiles on to California customers: “AB 473, as amended, might successfully prohibit Scout Motors (or every other new to-the market producer searching for to introduce new EV line-makes) from getting into the California market. Below this language, a new-to-the-market producer with new and modern EVs could be statutorily banned from deciding its distribution mannequin in California, doubtlessly killing off any cheap alternative to function within the state.”

Scout Says It Is Unbiased

Scout Motors has argued that it operates independently from Volkswagen, a 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 moderately than an impartial startup like Tesla. An important distinction could also be that Tesla is grandfathered within the 2023 modification to the California regulation whereas Scout Motors just isn’t. As well as, Tesla had no current car manufacturing operation when it started promoting electrical automobiles.

The piety of the brand new automobile sellers is questioned by Carscoops, which reviews one Volkswagen seller within the Golden State has slapped a $35,000 “market adjustment” on a Volkswagen ID. Buzz it has in inventory. It’s arduous 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 seller. That antipathy to the standard seller expertise is why Hyundai has elected to start promoting its automobiles in chosen markets by way of Amazon. Hyundai sellers are nonetheless a part of the gross sales course of, however the pricing is completed on-line. That method, the standard 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 every single day.

Placing the authorized shenanigans apart, we right here at CleanTechnica intergalactic headquarters need to surprise how distinct the Scout automobiles will probably be. Are they being constructed on a brand new platform or on a model of the prevailing MEB platform or upcoming SSP platform? Will they use batteries which are materially totally different from what Volkswagen Group makes use of in its different electrical fashions? And can they use totally different software program than different automobiles from the group? If the reply to these questions is “no,” it’s arduous to see how Volkswagen can assist 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 might affect the design of the software program bundle that will probably be included into Scout automobiles. We don’t usually have good issues to say about sellers, however it appears they’ve a reliable criticism, no less than in California.

Sellers in different states are making ready to affix the battle as nicely. Mike Stanton, the CEO of the Nationwide Vehicle Sellers Affiliation (NADA), has mentioned his affiliation is able to problem Scout “in courthouses and statehouses throughout the nation.” He predicts that Scout’s plans to handle each side of the possession expertise by way of its app “will fail.” Daniel Crane, a professor on the College of Michigan Legislation College thinks seller associations will decide states the place they’re the strongest to push again towards 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 facility is below building and testing of prototypes has barely begun. Challenges to seller franchise legal guidelines have been occurring since Tesla first started promoting the Mannequin S on-line in 2012. Even Tesla has but to win the correct to promote on to customers in a number of states, together with its house 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 instances 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 correct path for Scout Motors and Volkswagen or a poorly thought out technique that’s doomed to fail? We’d love to listen to what our readers need to say on that query.