A group of Volkswagen, Audi and Porsche dealers in Colorado have filed a lawsuit against the state, challenging its decision to grant Scout Motors a direct-to-consumer dealer licence in December.
The dealers, representing more than one-third of VW Group franchises in the state, argue that Scout Motors should not qualify for the same exemptions as electric vehicle-only brands like Tesla and Rivian because it plans to manufacture extended-range electric vehicles (EREVs).
The lawsuit, filed on 20 January in Denver District Court, alleges that Colorado’s Department of Revenue Division of Motor Vehicles incorrectly interpreted state law when determining Scout’s eligibility for direct sales.
According to Automotive News, the dealers contend that Scout and its parent company Volkswagen Group are essentially the same entity, meaning VW would be competing directly with its own franchised dealers in violation of dealer protection laws.
EREV technology at centre of dispute
The legal challenge centres on Scout’s decision to offer “Harvester” versions of its upcoming Terra pickup and Traveler SUV models, which combine electric powertrains with four-cylinder petrol engines that act as generators to extend range.
The dealers’ lawsuit refers to Scout’s extended-range system as a plug-in hybrid system, arguing this disqualifies the brand from Colorado’s exceptions for EV-only manufacturers.
Scout Motors disputes this interpretation. A company spokesperson told InsideEVs that “battery electric vehicles and extended range electric vehicles both meet the definition of electric vehicles under Colorado law, which is why the Dealer Board overwhelmingly approved our licence.”
The EREV variants are expected to deliver around 500 miles of range, compared to 350 miles for Scout’s pure electric models. The Terra and Traveler are scheduled to enter production in 2027 at a new factory in South Carolina.
Growing EREV market trend
Scout’s embrace of extended-range technology reflects broader industry trends, particularly for larger SUVs and pickup trucks where pure electric variants have struggled with consumer acceptance.
Scout CEO Scott Keogh told Bloomberg in October that 80% of the company’s roughly 130,000 reservations are for range-extended vehicles, suggesting strong consumer interest in the technology.
Other manufacturers are pursuing similar strategies, with Ford cancelling its electric F-150 Lightning in favour of an EREV successor, while Hyundai plans to introduce an EREV SUV with 600 miles of range to the US market in 2027.
Broader dealer franchise battles
Colorado’s 2020 amendment to its dealer franchise laws allows manufacturers to operate their own dealerships only “if the manufacturer manufactures only electric vehicles and has no franchised dealers of the same line-make in this state.”
The Colorado case represents the latest in a series of legal challenges facing Scout Motors. Dealers in Florida and California have also filed lawsuits against Scout and Volkswagen Group of America to block the brand’s direct-to-consumer sales plans.
These legal battles reflect ongoing tensions between traditional dealer networks and manufacturers seeking to adopt direct sales models, particularly in the rapidly evolving electric vehicle market.
While the US legal disputes have limited direct relevance to the Australian market, they highlight the broader industry challenges surrounding dealer franchise arrangements and the classification of emerging electric vehicle technologies.
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