VW, Audi and Porsche dealers in Colorado sue state over Scout dealer license
That didn't take long!
(article is from Automotive News)
A group of Colorado Volkswagen, Audi and Porsche dealers have filed a lawsuit against the state over a December vote that gave Scout Motors
a coveted dealer license.
The lawsuit, submitted Jan. 20 in Denver District Court alleges that the state’s Department of Revenue Division of Motor Vehicles incorrectly interpreted Colorado law when it found that
Scout is a manufacturer of only
electric vehicles and downplayed Volkswagen Group’s financial backing of the brand.
The suit lists 10 VW, Audi and Porsche dealerships as plaintiffs in the lawsuit. There are 28 VW, Audi and Porsche dealerships in the state, according to the lawsuit.
Additional dealerships could join the suit, said Richard Sox, managing partner at Bass Sox Mercer of Tallahassee, and a lawyer representing the plaintiffs.
Scout’s dealer application and subsequent letter to the department, according to the suit, asserted that it could receive a license due to two exceptions under Colorado law: Scout had no franchised dealers of the same line-make in the state and because the manufacturer builds only electric vehicles and has no franchised dealers of the same line-make in the state.
Colorado’s Motor Vehicle Dealer Board, which includes three new-car dealers, voted 6-2 on Dec. 16 to approve Scout’s application to become a dealer in the state.
The remainder of the Motor Vehicle Dealer Board consists of three used-vehicle dealers and three members of the public.
The Colorado license was a notable victory for Scout as it pursues
direct-to-consumer sales in the U.S. The vote
created more consternation among dealers nationwide as the issue of direct-to-consumer sales intensifies.
Scout
is also licensed to sell in California and has gained various permits in other states.
Unlike Scout-related lawsuits filed in
Florida and California, the Colorado lawsuit is not against Scout, VW Group or VW Group of America.
“This is a judicial review process of agency action,” Sox told Automotive News. “This is a little different than like what we’ve done in Florida or what California has done where you end up in federal court, Scout is the defendant and you’re saying, ‘Hey, they’re violating the law by what they’re doing.’”
The Florida and California lawsuits are ongoing.
A spokesperson for the Colorado Department of Revenue’s Specialized Business Group, which includes the board, did not immediately respond to a request for comment.
Scout’s decision to sell an extended-range electric vehicle energy system alongside a full electric version of the Traveler SUV and Terra pickup is at the center of the lawsuit.
The lawsuit refers to Scout’s extended-range system as a plug-in hybrid system and therefore claims that the brand does not qualify for exceptions in Colorado law which are meant for EV-only brands such as Rivian and Lucid.
With an extended-range EV, a vehicle can drive exclusively on electric power even after the energy in the battery pack is consumed. Extended-range EVs use a gasoline engine mated to a generator to feed electricity to the vehicle’s drive motors.
Extended-range EVs can operate normally without plugging in or, if the battery pack is charged, without the gasoline engine running.
With a plug-in hybrid, the gasoline engine has a mechanical connection to the wheels and drives the vehicle in conjunction with the electric motor or by itself. The gasoline engine in an extended-range EV powers only the generator.
Scout
plans to tap VW Group’s Mexico manufacturing hub for the engine in its extended-range energy system named the Harvester.
Scout is the same entity, lawsuit alleges
The lawsuit also alleges that Scout’s connections to VW Group make the brand no different than Audi, Porsche or VW in the state.
Those three brands are licensed manufacturers in the state and Colorado law prohibits the brand from owning, operating or controlling a dealership.
VW Group, VW Group of America and Scout maintain the electric vehicle startup is and will remain independent — something dealers
have questioned.
VW Group is attempting to sidestep the law by obtaining a dealer license through Scout, the lawsuit alleges.
“Scout is so closely tied with Porsche, VWoA, and AoA, that it is their alter-ego, through Volkswagen AG’s control of each entity,” the lawsuit said. “The Department, in making its licensing determination, should have determined that Scout, Porsche, VWoA, and AoA were the same entity for purposes of determining whether Scout has no franchised dealers of the same line-make in Colorado.”
Scout’s dealer license will adversely impact Porsche, VW and Audi franchised dealerships in Colorado, the lawsuit alleges.
“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 their franchised dealers,” the lawsuit said.
The plaintiffs are requesting that the Dec. 16 decision to give Scout a dealer license be declared unlawful and restrain the department from enforcing the license.
Scout
is aiming for production to begin in late 2027 at a plant under construction in South Carolina.
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