Volkswagen‘s subsidiary, Scout Motors, hasn’t delivered a single production vehicle yet, but the Volkswagen-backed startup is in legal trouble. A new lawsuit in Colorado is challenging the state’s decision to allow Scout to sell vehicles directly to customers, a privilege reserved for EV-only automakers. This isn’t the first time that Scout has had legal battles tied to its direct-to-consumer ambitions, either.
Dealers Call Out The State of Colorado
Scout Traveler
According to Automotive News, the lawsuit was filed on January 20 in the Denver District Court by a group of Volkswagen, Audi, and Porsche dealers operating in Colorado. Rather than going after Scout Motors directly, the dealers are suing the state, claiming regulators misapplied franchise law when approving Scout’s dealer license late last year. House Bill 19-325 allows manufacturers to sell direct only if they produce electric vehicles exclusively and have no franchised dealers of the same brand in the state. The bill defines an electric motor vehicle in a way that dealers argue excludes any vehicle with a fuel combustion engine, even if said engine doesn’t power the wheels. Therefore, the plaintiffs argue the Department of Revenue’s Motor Vehicle Dealer Board wrongly classified Scout as an EV-only automaker and downplayed its close relationship with the Volkswagen Group.
When an EV Isn’t Electric Enough
Scout Motors electric Terra truck and Traveler SUV
Scout Motors
The lawsuit largely hinges on Scout’s powertrain strategy. Alongside fully electric versions of its Terra pickup and Traveler SUV, Scout plans to offer extended-range electric variants that use a gasoline engine purely as a generator to recharge the battery, much like the upcoming Ford F-150 Lightning replacement. Theoretically, these vehicles can operate entirely on electric power and therefore could qualify as EVs under Colorado law. But dealers disagree. The suit characterizes the setup as a plug-in hybrid, arguing that the presence of a combustion engine disqualifies Scout from exemptions meant for brands like Tesla, Rivian, or Lucid. And considering around 80% of early Scout reservations have been for the range-extended models, the brand probably won’t ditch its EREV ambitions to roll over for legislation.
How Cars Will Be Sold in The Future
Scout Traveler
Scout Motors
Nowadays, there are countless ways dealerships operate. Some are going back to basics, following the old ’90s relationship-based approach, while others, like Tesla, still operate via online orders exclusively – excluding Japan. With EV demand cooling and sales declining, brands are forced to cut costs, and offering direct sales does exactly that. Dealers argue that allowing a VW-backed brand that doesn’t manufacture pure EVs undermines the law, and they have a point. But new rules are needed for new products. We can’t help but shake the feeling that these legacy dealers might be attacking Scout to eliminate their competition, well before they even arrive.
