US Volkswagen Dealers Alarmed By Scout Announcement

Volkswagen dealers in the US were shocked and dismayed by the company’s announcement last week that it plans to introduce two new battery-electric vehicles — a pickup truck and an SUV — to America using the Scout brand it acquired when it bought truck manufacturer Navistar recently. Why are they upset? Because the company never told them about the new Scout brand and has been pretty stingy with information for the dealers ever since.

Now the dealers are worried that Volkswagen may be planning to sell those vehicles directly to the public and cut them out entirely. Based on statements made by company officials since the announcement, their concerns may be quite valid.

According to Inside EVsVolkswagen of America sales and marketing boss Andrew Savvas told the 650 US dealers in a letter dated May 13 that Scout will be an independent brand within the group and that they will have no claim on its products.

Volkswagen Group CFO Arno Antlitz said after the last week announcement that Scout “will be a separate unit and brand within the Volkswagen Group to be independently managed. This aligns with the new group steering model — small units that act agilely and have access to our tech platforms to leverage synergies.” No executives for the new unit and brand have been announced and no details about where the Scout vehicles will be manufactured have been released.

A lack of information is an invitation for rumors to get started. One Volkswagen dealer reportedly told Automotive News, “If we were going to have any involvement, they would have told us something. But they haven’t said a word to us, either before or after the announcement.”

Volkswagen says it is targeting 250,000 sales a year for the new Scout brand, which seems entirely possible, given Americans’ pinchant for rugged, all terrain vehicles to whisk them to the grocery store and the office. Ford can barely keep up with the demand for its new Bronco, which is as close to a knock-off of the Jeep Wrangler as you can get without being sued. And anything that hints of being an SUV is practically guaranteed to be a sales success.

The problem, of course, is that many US states have laws banning direct sales. The whole world has transitioned to online marketing, as the success of Amazon will attest, but heaven forfend that automobiles are sold that way. It’s unAmerican, unconstitutional, and besides, the auto dealers have paid good money to get “friends” elected to state legislature and they expect a return on their investment!

Volkswagen has reconfigured its relationship with its dealers in Europe, where it now sells its electric cars directly to customers but delivers them through dealers, who remain the point of contact for the owners afterward. No doubt Volkswagen dealers in the US are aware of those changes on the Continent and are reluctant to see something like that take place on this side of the pond.

The Takeaway

“Creative destruction” is one component of capitalist theory. Kodak was the king of the mountain in photography until it wasn’t. Nokia, Xerox, IBM, and many others have gone from market dominance to near irrelevancy. Electric cars are disrupting the traditional car business in ways no one (except Elon Musk) could have foreseen a decade ago,

Car dealers can see a train wreck waiting ahead for their business model and are desperate to preserve their market hegemony. It may be a losing battle.


 


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