Ten Front Range auto dealerships are suing the state over its decision to allow Scout Motors, a Volkswagen-backed manufacturer, to sell its off-road electric vehicles to Coloradans.
“Colorado law prohibits Porsche, Volkswagen or Audi from owning, operating or controlling a dealership,” it says. “However, Volkswagen is attempting to sidestep this prohibition.”
Manufactured between 1960 and 1980, Scouts were beefy 4x4s and a forerunner to the SUV.
Volkswagen bought the Scout parent company in 2021 and announced it would begin selling new Scouts in 2027. Its direct sales model means Scout will own its stores and service centers here.
“Just as utilizing franchised dealers may be appropriate for some brands and their customers, utilizing a direct sales model best supports our customers,” Scout said Thursday.
That doesn’t sit well with Volkswagen, Audi and Porsche dealers, who think it is unfair they must compete for customers against an independent offshoot of Volkswagen, their supplier. Porsche and Audi are also subsidiaries of Volkswagen, which is headquartered in Germany.
“If this type of arrangement is valid under Colorado law, there is no mechanism to prevent other manufacturers such as General Motors or Ford from setting up alter-ego companies to sell directly to consumers and compete with franchised dealers,” their lawsuit states.
On Dec. 16, the matter came before Colorado’s Motor Vehicle Dealer Board, which voted 6-2 to grant a dealership license to Scout, meeting minutes show. One member wasn’t present.
Scout Motors approved to sell vehicles, including Scout EV, directly to Colorado consumers
Appointed by the governor, the nine-member board consists of three new-vehicle dealers, three used-car dealers and three members of the public. New-car dealers Craig Fisher of Boulder and Matthew Gebhardt of Loveland opposed Scout’s application. The board’s only Audi and Porsche seller, Dave Guttenberg of Denver, supported Scout.
“Scout Motors is unwavering in our loyalty to the customer and will not be intimidated out of doing what is right for them,” a company statement to BusinessDen explained.
“Despite repeated attempts by dealer lobbyists to unfairly prevent Colorado consumers from choosing how they want to buy cars, this decisive approval by the Dealer Board ensures that we can continue moving forward with our business plans to invest in Colorado, employ Colorado workers and deliver a modern, customer-focused experience,” it said Thursday.
Local dealerships have not given up. They sued the Colorado Division of Motor Vehicles on Tuesday and asked Denver District Judge Jill Dorancy to prevent the DMV from issuing a dealer license to Scout. Their lawyers are Adrian Castro and Randy Earnest at Fairfield and Woods in Denver. DMV spokeswoman Corinne Willer declined to comment.
“Dealers have always been the first line of defense for consumers,” says Matthew Groves, CEO of the Colorado Automobile Dealers Association, a trade group.
“The ultimate result (of direct sales) is that when a consumer needs help, they have to sit on a voice-automated 800 number with somebody on the East Coast rather than just showing up on a dealer’s doorstep and saying, ‘I need you to fix my car,’’’ Groves said Thursday.
The 10 plaintiff dealerships — two Emich Volkswagen locations, Tynan’s Volkswagen in Aurora, McDonald Volkswagen and Audi Denver in Littleton, and several in Colorado Springs — claim the Motor Vehicle Dealer Board erred when it approved Scout’s application last month.
A state law known as the Colorado Dealer Act generally prohibits automakers from owning dealerships and competing against their own franchisees. But there are two exceptions to the law that apply in Scout’s case, according to the dealer board: one for electric vehicle makers and another for manufacturers that do not have affiliated dealerships in Colorado.
The plaintiff dealerships claim the first rule does not apply to Scout because its hybrids don’t qualify as EVs and the second does not apply because Scout is really Volkswagen and Volkswagen has dealerships here. It will fall on Dorancy to determine who is right.
“We’re not against direct-to-consumer sales. Tesla does this, Rivian does this, Lucid does this,” Groves said, referring to other automakers who sell here. “We actually created this section of law in an agreement with those companies six years ago. But when you have franchised dealers, you can’t do this. You can’t push your partners aside to go after more money.”
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