Photo of Scout Traveler
Volkswagen Dealership Class-Action Lawsuit Against Volkswagen Corporate
As recently reported in the Hartford Business Journal, Curran Volkswagen of Stratford is a plaintiff in a class-action lawsuit against Volkswagen AG, Volkswagen Group of America and Scout Motors over violations of the state franchise law. Scout Motors is a recently formed, wholly owned subsidiary of Volkswagen that is selling its plug-in vehicles directly to consumers. This venture by VW represents a new twist in the direct sales wars and there are VW dealership lawsuits across the country. Scout Motors has been taking reservations online for its full-size SUV and pickup truck with deliveries expected to begin in 2028.
Leaving aside the legal jousting, this battle is different in a couple of ways from the heretofore unsuccessful efforts in Connecticut to pass a state law permitting direct sales. Scout is not going the route that Tesla, Rivian, and Lucid have taken of going state by state to get legislatures, courts or regulatory bodies to grant an exception to state law. They sent a letter to the Federal Department of Justice last July asking them to eliminate state-level motor vehicle franchise laws, characterizing them as “burdensome restrictions on competition” as reported in Automotive News.
In 2021, Congressman Jim Himes, representing Connecticut’s 4th Congressional District, spoke to the EV Club. When asked about the possibility of the federal government getting involved in direct sales (after the Federal Trade Commission had written an opinion that the franchise laws are anti-competitive), he acknowledged that while there is federal pre-emption, he did not expect the federal government to intervene. We now have a different administration. While being unfriendly to EVs, they do seem inclined to blow stuff up, so who knows.
Proposed CT Direct Sales Law Would Not Have Helped Scout
Interestingly, the proposed CT law would not have helped Scout. It applied to companies that only made battery electric vehicles (BEV). Scout is making both a BEV and an EREV (extended range electric vehicle) version of its two models. Motor Trend reported that 87% of the reservations have been for the EREV variant.
Regardless of the powertrain, the strategy of Scout indicates some serious reservations on its part regarding the ability of the VW dealership network to sell plug-in vehicles.
The dealers may well view the attempt by Scout to secure federal pre-emption as an existential threat. Revoking the franchise laws in their entirety would remove the protections afforded to dealerships from their affiliated manufacturers. That was the purpose of the laws when they were passed long ago, well before Tesla came on the scene. The direct sales bill raised in the CT legislature did not propose to remove the provisions governing the relationship of the dealership and OEM.
EREVs Poised for a Comeback
An EREV powertrain is a variation on a plug-in hybrid. It has a larger battery than a typical PHEV and supplements it with a gas engine that powers the electric drive (i.e. does not power the wheels directly). The EREV powertrain, represented mainly by the Chevy Volt in the past, is poised to make a major comeback. The revamped Ford F150 Lightning will be an EREV, as will the Dodge Ram 1500 REV pickup. Specs on the Ram have been announced. It will have a 92 kWh battery that gets 145 miles of electric range. When coupled with the gasoline range extender, the total range jumps to 690 miles.
State Law Going Nowhere
Efforts to pass a state direct sales law in CT are moribund and have been for a few years. We have Elon Musk to thank for that as he has alienated so many people while ironically turning himself into the dealers’ best friend. At least that is how the dealers may see it. The dealers’ own trade association, the National Automotive Dealers Association, has documented that dealerships have thrived in states with direct sales. Also, it helps overall EV adoption.
In case you’re wondering, this is the status of state-level direct sales laws around the country from the Electrification Coalition.
The dark blue states where this is “allowed for certain manufacturers only” are states where Tesla succeeded in getting a carve-out that was tailored specifically for them and which occurred before the more recent entrants came along.