US auto dealers take Scout Motors to court over selling cars directly to customers

This should be one of the most charged debates in the American auto industry this year. Scout Motors’ decision to sell cars directly to customers drew strong backlash from franchise dealers, highlighting long-standing tensions between traditional retail networks and emerging direct-to-consumer business models.

The clash has intensified in Colorado, where the state Motor Vehicle Dealers Board’s decision to grant a dealer license to Scout has unsettled established dealers, raising broader questions about the future of auto retailing.

New sales model meets old-guard resistance

Scout Motors is a Volkswagen Group backed EV brand. The company deliberately adopted a sales approach aligned with Tesla, Rivian and Lucid.

Unlike traditional manufacturers that rely on independent franchise dealers to sell and service vehicles, Scout wants to manage everything from reservation to delivery through its own facilities and online platform. That model promises transparent pricing, streamlined transactions, and a more streamlined experience for customers.

But dealers see a threat to the industry’s long-standing franchise system, which they say has strengthened local economies, provided guaranteed service networks and protected consumers.

In a recent episode of within the automotiveIndustry veteran Mike Maroon, CEO of Mike Maroon Auto and a former Autonation executive, described Colorado’s regulatory approval as “a rip-off of the traditional franchise system” that undermines decades of established dealer investment and security.

He dismissed Scout’s claim to operate separately from its corporate parent, Volkswagen, using a familiar saying to make his point: “If it walks like a duck and quacks like a duck, it’s a duck.”

Maroon’s criticism reflects fundamental disputes about corporate structure and brand identity. Scout insists it is a distinct brand with its own business model, but dealers counter that Volkswagen’s financial backing and deep operational ties make that distinction superficial. They argue that allowing a manufacturer-backed brand to bypass the dealer network sets a worrisome precedent that could lead to reliance on protecting franchisees.

An existential battle for the franchise system

The Colorado decision is especially important because the state boasts one of the strongest electric vehicle markets in the country, with about 27 percent of all vehicle sales being electric. Federal and state incentives have helped fuel demand, although changes in incentive structures have moderated growth recently. Even in a strong market, dealers feel the pressure as new direct selling approaches gain regulatory footholds.

Maroon proposes that dealers consider a multipronged response that could include litigation, negotiation, and political advocacy. He emphasized the value of dealer associations in leveraging political capital to unite opposition and defend the status quo. In his view, the threat is existential rather than theoretical, with manufacturer-owned direct sales potentially eroding the economic base of independent dealers.

The friction goes beyond Colorado. Dealer groups nationwide, including the National Automobile Dealers Association, have vowed to challenge Scout’s direct-to-consumer strategy in courts and statehouses across the country. These challenges echo earlier disputes over Tesla and other electric vehicle makers that have similarly abandoned franchise networks, testing state franchise laws that were drafted before Internet-based sales were possible.

In some states, traders have already escalated their opposition to the lawsuit. In Florida, for example, Volkswagen and Audi dealers filed suit claiming that Scout’s direct sales violated state law by accepting deposits for vehicles that were not in production. They claimed that they sought an order to stop the practice saying that taking deposits is a sale as per the definition of the state. The controversy underscores how the legal interpretation of sales activity varies widely among states.

A war on the future of car buying

Scout’s supporters argue that the direct model is aligned with consumer expectations shaped by online retail and digital services. They argue that eliminating middlemen can reduce friction and costs, providing a more transparent experience for buyers. Scout’s leadership has expressed optimism about consumer demand for its Terra pickup and Traveler SUV, even as dealer pushback continues to grow.

At its core, the conflict encompasses broader industry transformation. Traditional merchants emphasize their local economic impact and service capabilities. Direct-to-consumer proponents highlight efficiency and modern customer engagement. As Scout and similar brands expand, the legal, economic and political tussle will continue, shaping how Americans buy vehicles for decades to come.