The California New Car Dealers Association filed a lawsuit against German automaker Volkswagen AG and its Scout Motors division, which produces EVs the company wants to sell directly to consumers.

The suit, filed in the Superior Court of San Diego County, says direct sales and recent Scout activities — including taking deposits from California residents — are a violation of state law. In 2023, California Assembly Bill 473 was passed to expressly prohibit factories from using affiliated brands to compete against their franchised dealers.

“VW dealers would welcome the opportunity to sell Scout trucks and SUVs, but their manufacturer business partner is denying them that opportunity, in direct violation of California law,” CNCDA President Brian Maas writes, in part, in a release. “Volkswagen can’t pick and choose which vehicles to sell on its own or through its franchised dealer network, reserving the most profitable or desirable vehicles for itself. Illegal competition will harm not only dealers but also the communities and car buyers that they serve. That is why the Legislature unanimously approved this important law.”

The lawsuit formalizes a complaint outlined in a cease-and-desist letter sent by CNCDA to Scout in December.

In early February, a group of Florida dealers sued VW and Scout along similar lines. Later that month, a Scout-supported bill that would have allowed direct sales in South Carolina, where its EVs will be built, stalled in committee.

Read more at CNCDA.org