A group of Colorado auto dealers has filed a lawsuit against the state, challenging its decision to grant Scout Motors a license to sell vehicles directly to consumers, escalating opposition to the new Volkswagen-backed brand’s retail strategy before it has begun production.
More than one-third of Colorado’s Volkswagen, Audi and Porsche dealers submitted the lawsuit on Jan. 20 in Denver District Court, arguing that the state’s Department of Revenue Division of Motor Vehicles misinterpreted dealer franchise laws when it approved Scout’s direct-sales license in December. The dealers are not suing Scout Motors itself, but the state agency that authorized the license.
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According to a report by Automotive News, the lawsuit alleges that regulators incorrectly determined that Scout Motors qualifies as an electric-vehicle-only manufacturer and minimized the financial and corporate ties between Scout and its parent, Volkswagen Group. The dealers argue that Scout and Volkswagen Group should be treated as the same entity under Colorado law, which would prohibit a manufacturer from competing directly with its franchised dealers.
“The lawsuit 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,” Automotive News reported.
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Scout’s plans to sell range-extended electric vehicles have also become a focal point of the dispute. The dealers contend that Scout’s extended-range system should be classified as a plug-in hybrid, rather than a fully electric vehicle, which would disqualify the brand from legal exemptions in Colorado that allow EV-only manufacturers such as Rivian and Lucid to sell directly to consumers.
Scout plans to offer “Harvester” versions of its Terra pickup and Traveler SUV that pair smaller battery packs with a four-cylinder gasoline engine acting as a generator. The company has said the configuration will deliver about 500 miles of total driving range, compared with roughly 350 miles for its fully electric models.
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Production of the Terra and Traveler is scheduled to begin in 2027 at a new Scout manufacturing facility in South Carolina. The outcome of the Colorado case could have broader implications for how states interpret franchise laws as automakers introduce new brands and powertrain strategies that blur the line between electric and hybrid vehicles.
