Volkswagen, Audi Dealers Sue Scout Motors over Sales Model
A group of and dealers in Florida have filed a lawsuit against over its direct-to-consumer sales model.
The suit, filed February 3, challenges Scout's independence from the Volkswagen group and alleges that the startup's model violates state law.
According to a , the suit also claims that Scout is not properly licensed as a manufacturer in Florida.
Scout Motors is facing its first legal battle. A coalition of Audi and Volkswagen dealers in Florida have filed a lawsuit against the young startup, challenging the direct-to-consumer sales model of its Terra and Traveler vehicles. According to Automotive News, the suit challenges Scout's independence from Volkswagen and alleges that the startup's sales model violates state law.
While expected, the suit is an escalation from October, when the CEO of the National Automobile Dealers Association called Scout's direct-sales strategy "misguided" and said "it will be challenged."
The suit alleges that Scout, which is owned by Volkswagen Group, is not an independent entity. The report from AN shows that Volkswagen Group, Volkswagen Group of America, and Scout maintain that the new company is and will continue to be an independent entity.
Speaking to AN, John Forehand, one of the lawyers representing the dealers, said VW Group owns more than 30 percent of Scout. As of 2023, in Florida, if a manufacturer owns 30 percent or more of a company, that company is considered a "common" entity.
The dealers argue that as a common entity, Scout's $100 refundable reservations should be considered illegal. "In Florida, taking a deposit is defined as conducting a sale," Forehand told Automotive News. Manufacturers such as Tesla, Rivian, and Lucid who use similar direct-sales models are able to do so because the brands don't have franchised dealers that they compete with. Scout, on the other hand, cannot sell directly to consumers, which includes taking deposits, Forehand said.
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