The Case Continues
Scout Motors hasn’t even sold a single car yet, and it’s still at odds with the ‘volks’ that can sell them ‘wagens.’ Under the startup’s business model, the Volkswagen-backed brand is planning to go directly to consumers, but it’s encountered stiff resistance because of certain laws that prevent automakers from doing so.
Chief Judge Cynthia Bashant of the U.S. District Court for the Southern District of California has denied both Volkswagen Group of America and Scout Motors the motion to dismiss a California New Car Dealers Association lawsuit that’s against the startup’s direct-to-consumer plans.
Scout Motors
Dealer Franchises Are Not Happy
Scout Motors’ legal team seems to be working overtime, serving suits to protect its interests and standing its ground in court at the same time. Because the brand wants to sell straight to the end consumers, franchised dealers under the Volkswagen Group of America are strongly opposed to this, so much so that some dealers have even banded together in order to assert the franchise laws that protect them.
The California New Car Dealers Association filed the suit in April 2025, stating that Scout is wholly owned by the Volkswagen Group of America, and the association claims that the company cannot use a subsidiary to sell cars, even if it is under a different brand. Additionally, the association also “plausibly” alleges that the Volkswagen Group of America violated California’s Unfair Competition Law through Scout Motors.
Under an amendment to the state’s franchise law, which took effect on January 1, 2024, the association claims that the direct-to-consumer model that Scout is planning to employ violates the amended state law. Specifically, that state law requires affiliated brands to use franchised dealers to sell and service vehicles, according to the suit. The other allegation that the association is holding against VW and Scout is that VW is circumventing California law by positioning Scout as a different brand altogether and competing with its own existing franchisees.
California is only one state that has filed a suit against Volkswagen of America for the Scout brand. Even in Florida, Scout fought existing franchises because of its direct-to-consumer business model.
Scout Motors
Motion Denied… Twice
This development was reported by Automotive News. Scout Motors moved to dismiss the case once before, but it was eventually denied. Now the same situation is playing out. During the first denial, the Volkswagen Group of America raised several arguments, but the case continued anyway. Now, another motion to dismiss was denied once again, and the case will proceed with more discovery.
“The court told Volkswagen and Scout essentially what it told them in March, said Anthony Bento, the California New Car Dealers Association chief legal officer. “They raised arguments that were available to them the first time around, and the court declined to dismiss the case – now twice. Our claims stand, and we continue with discovery in the case.”
As usual, Scout Motors and Volkswagen Group of America declined to comment.
Scout Motors
