California’s New Car Dealers Association (CNCDA) issued a cease-and-desist letter to Volkswagen (VW) and Scout Motors, challenging VW’s plan for Vwdirect sales to consumers, bypassing franchised dealerships. This move, announced in December 2024, ignited a conflict over California Vehicle Code section 11713.3(o), which prohibits manufacturers from competing with their franchisees through affiliates.
vwdirect Sales Model: A Legal Battle Brews
The CNCDA contends that Scout, as a VW affiliate, is subject to the same legal restrictions as VW itself. Consequently, the proposed vwdirect sales model for Scout vehicles directly violates California law. The association argues that this strategy undermines the established franchise system, potentially leading to job losses, reduced local tax revenue, and compromised consumer protections. The CNCDA emphasizes that the franchise system ensures fair pricing, consistent customer service, and accountability within the automotive market.
Franchise System Under Threat: The CNCDA’s Concerns
Brian Maas, President of the CNCDA, voiced strong concerns about the potential impact of vwdirect sales on California’s economy and consumer interests. He urged VW to comply with state law and integrate franchised dealers into its Scout sales strategy. The CNCDA highlighted that the current legal framework, designed to protect consumers and promote competition, is threatened by VW’s actions.
AB 473: A Preemptive Strike Against Direct Sales
Anticipating potential conflicts over direct sales models like vwdirect, the CNCDA sponsored Assembly Bill 473 (AB 473). This bill, signed into law in 2023 and effective January 1, 2024, explicitly prohibits manufacturers from circumventing franchised dealers for direct sales. Ironically, Scout participated in discussions surrounding AB 473, acknowledging the bill would directly impact its proposed distribution model. Despite this, VW proceeded with its vwdirect plans, leading to the current standoff.
The Future of vwdirect in California: Legal Action Looms
The CNCDA’s cease-and-desist letter signals its intent to pursue legal action if VW doesn’t abandon its vwdirect sales strategy for Scout. The association remains steadfast in its commitment to upholding California’s franchise laws, protecting dealerships and consumers, and maintaining a fair and competitive automotive market. The outcome of this dispute could significantly impact the future of direct-to-consumer car sales in California and potentially set a precedent for other states. The CNCDA’s resolute stance against vwdirect underscores the ongoing tension between evolving automotive sales models and established legal frameworks.
