There is a lot of excitement in the auto industry about the recently unveiled Scout Traveler SUV and Scout Terra truck EV concepts including from yours truly. What is NOT so exciting, however, is how Volkswagen is choosing to sell the Scout lineup which is due to head into production in 2026. VW has decided to bypass its own, loyal, VW dealers and instead turn Scout into a stand-alone brand. You can bet dealers are unhappy and, in my opinion, rightfully so - and you can expect legal challenges as a result. I'll share a message to VW below, but first, here's what is going on.
Volkswagen says it is going to implement a direct-to-the-consumer model DTC, similar to what Tesla, Lucid, and Rivian use. In other words, no dealerships. Many states, like Texas, do not allow this practice. The National Auto Dealer’s Association jumped on the Scout plan immediately and released the following statement by its President and CEO Mike Stanton:
"VW AG’s decision to attempt to sell Scout vehicles direct to consumers and compete with its U.S. dealer partners is disappointing and misguided, and it will be challenged. Unfortunately, it’s also not terribly surprising, as VW AG CEO Oliver Blume and Scout CEO Scott Keogh have avoided engaging with or even responding to NADA for months.
"Since VW AG signaled the reemergence of the Scout brand in the U.S., NADA has communicated very clearly on numerous occasions to their leadership that the franchise system is the best and most-efficient way to deliver the customer experience that today’s marketplace demands. This was recently reinforced by an independent study of the cost and value of new-car distribution by the consulting firm, Oliver Wyman, which concluded that utilizing franchise dealers is more cost-effective than a direct sales channel and provides tremendous value to automakers and consumers alike.
"NADA and state dealer associations fully stand behind VW and Audi dealers that are being left behind by this decision, and are prepared and will challenge this and all attempts to sell direct in courthouses and statehouses across the country."
Charlie Hall, chairman of the Volkswagen National Dealer Advisory Council and president of Hall Imports in Brookfield, Wis., near Milwaukee, told Automotive News that VW Group of America provided zero communication ahead of Scout’s announcement. Not a good plan by VW in my opinion. It is almost cruel of VW to show these beautiful vehicles to everyone, including the beleaguered Volkswagen dealers, only to find out that they were being passed by.
In a statement, Scout officials say the company plans “dedicated retail spaces” and said it will establish one-to-one relationships with customers via an app that will handle reservations, sales, delivery, and service, with vehicle purchases “completed in minutes.”
Customers, Scout added, will “know what they are paying and can expect full price transparency.”
Scout added: “the SUV and pickup will have robust repairability and flexible serviceability. There will be a Scout Motors national collision partner network and the brand said 80 percent of repairs can be completed outside of a Scout workshop, without providing more details."
The debate about people being able to buy directly from a manufacturer has gone on for decades. At first thought, people love the idea and I understand why. The reality is much different, and I have seen it with my own two eyes 25 years ago when Ford bought dealerships in entire large markets like Tulsa and Oklahoma City. I wrote about this in my True Stories series, which you can read here.
I know all the arguments in favor of this, the main one being to “cut out the middleman”. Many think it would make car buying “easier”. There is some truth to the latter argument. Yes, it is much easier to just pay the price on the window sticker, which is what you’ll do from a direct-to-consumer model, but think about it, you can do that now. Go to ANY dealership today, any brand, walk in and say: “I’m here to buy XXXXX and I’ll pay the price on the window sticker” and see what a pleasant buying experience you have.
What is missing in the direct approach is competition. Dealers compete on price and everybody knows that, and this keeps prices lower. As I wrote in my advice column last week, is the best price always the best deal? The answer is no. Forget price for a moment, car dealers also compete for your business in many other ways like giving you great service after you buy your vehicle. Your dealer often fixes things on your car the factory doesn’t pay for and they don’t even tell you. They go to bat for you with the factory when there are disputes about whether an item is covered by warranty. If you buy direct, there is nobody on your side. If the factory says no, that’s it! It’s over.
America was built on competition and the strong survive. VW would be wise to reconsider the plan to sell direct. The way in which the company has kept the dealers in the dark for two years is deplorable, then to spring the news on them when the rest of the world finds out, makes it even worse. The factory is supposed to be partners with the dealers that represent them, and this is no way to treat your partner.
VW dealers have stood by the company through crap cars and the biggest emissions scandal to ever hit the world, and this is the way you treat them? Shame on you. You deserve what you’ll get for being so incredibly short-sighted and greedy.
Photo Credit: Scout Motors.