Scout Gets the OK to Sell Directly to Customers in Colorado

Scout Motors, a Volkswagen Group subsidiary, has been been actively lobbying state governments to permit a direct-to-consumer sales model, bypassing the traditional franchise dealership system and mirroring the approach used by EV manufacturers such as Lucid and Rivian. Earlier this month, Colorado formally approved this effort, allowing Scout to sell vehicles directly to consumers rather than through franchised dealers, according to Automotive News.

On December 16, the Colorado Department of Revenue’s Specialized Business Group, which includes the Motor Vehicle Dealer Board, voted 6–2 to grant Scout Motors a license to sell vehicles directly in the state. This approach is central to Scout’s long-term strategy, with CEO Scott Keogh comparing the experience to purchasing an iPhone directly from Apple instead of through a big-box retailer. While the decision marks an important early win, it also raises questions about where Scout may encounter resistance.

It is important to note that despite the board’s favorable vote, the decision does not yet constitute finalized state policy. Colorado dealer groups were quick to criticize the move, arguing that Scout’s plan represents a circumvention of the traditional franchise system. Former AutoNation executive and dealer network CEO Mike Maroone has challenged Scout’s assertion that it operates independently from the broader Volkswagen Group, which maintains established dealer networks for brands such as Volkswagen and Audi. In an interview with CBT News, Maroone remarked, “If it walks like a duck and quacks like a duck, it’s a duck.”

Colorado represents a meaningful EV market, ranking behind only larger states such as California, Texas, and Florida in overall EV adoption. As a result, the outcome there could provide momentum for Scout as it seeks similar approvals elsewhere.

Even within the direct-to-consumer EV landscape, regulatory hurdles remain. Tesla, for example, is still prohibited from selling directly to consumers in several states, including Texas, and instead structures transactions as out-of-state purchases before delivery. Scout could adopt a similar workaround if necessary, though doing so adds complexity for both the company and customers.

If the Colorado Motor Vehicle Board’s decision withstands potential appeals from dealer associations, it could establish an important precedent. Colorado already permits direct sales by Rivian, Lucid and other EV makers under legislation passed in 2020. Assuming no reversal, Scout Motors appears positioned to move forward with direct-to-consumer sales, at least within Colorado, through company-owned showrooms.

Why Dealerships Are Fighting Direct-to-Consumer (DTC) Vehicle Sales

The growing push by automakers, particularly electric vehicle manufacturers, to sell cars directly to consumers has triggered fierce resistance from traditional car dealerships. While DTC sales promise a simpler, more transparent buying experience for customers, they also challenge a century-old franchise system that dealerships are determined to protect. Understanding why dealers are fighting DTC sales requires examining history, economics, and control.

The dealership model did not emerge by accident. In the early and mid-20th century, states enacted franchise protection laws to shield local dealers from powerful automakers that could otherwise undercut them, terminate franchises at will, or favor company-owned stores. These laws embedded dealerships into state regulatory frameworks, making them legally protected intermediaries rather than optional sales channels.

As a result, dealerships today are not just businesses but politically influential local entities, often employing hundreds of people and contributing significant tax revenue. Any move toward DTC sales is therefore viewed not merely as competition, but as a direct threat to a legally protected structure.

Dealerships argue that DTC sales would devastate their business model. While new car sales generate revenue, the real profit center for most dealers lies in financing, extended warranties, add-ons, and service. A direct sales model strips away many of these high-margin opportunities by standardizing pricing and simplifying transactions.

From the dealer perspective, DTC sales could reduce their role to service-only operations, shrinking margins and weakening long-term viability. That financial risk explains why dealer associations aggressively lobby state legislatures and regulatory boards to block or slow DTC approvals.

Dealers also fight DTC sales because it shifts power back to automakers. Under a DTC model, manufacturers control pricing, inventory, and customer data. In the franchise system, dealers set final prices, manage local inventory, and own the customer relationship.

Losing that control not only affects profits but also diminishes dealers’ leverage within the automotive ecosystem. For many dealer groups, DTC is seen as the first step toward eventual disintermediation.

A common argument from dealerships is that allowing new EV brands or spin-off subsidiaries to sell direct creates an uneven playing field. Legacy automakers like Ford, GM, and Volkswagen are bound by franchise agreements, while newer brands such as Tesla, Rivian, Lucid, and Scout Motors seek exemptions by claiming they lack existing dealer networks.

Dealers contend that these distinctions are artificial, especially when DTC brands are backed by large automotive groups. This argument has gained traction in regulatory hearings, where dealer associations frame DTC as a loophole rather than innovation.

As more states revisit franchise laws and as automakers push harder for DTC approvals, the battle is likely to intensify. For dealerships, the fight is not just about how cars are sold, but about preserving their role in the automotive value chain.

EVinfo.net’s Take: Dealers Face Many Struggles in the EV Transition

Dealers in North America face pressure from both the direct-to-consumer model and declining maintenance and repair revenue from EVs, as EVs need much less maintenance and repair than internal combustion engine (ICE) vehicles.

According to Consumer Reports, the estimated lifetime maintenance and repair costs for a battery electric vehicle (BEV) average $4,600. In contrast, ICE vehicles average $9,200 in maintenance costs over their lifetime. This results in a savings of around $4,600 over the vehicle’s lifespan.

Most dealerships are not well prepared to sell EVs, and need to massively step up their staff’s EV knowledge, as well as offer services such as EV charging at the dealership.

Are Dealerships Good or Bad?

A dealership’s value to consumers depends largely on their level of EV knowledge, how they operate, how transparent they are, and how well their incentives align with the buyer’s interests.

On the positive side, good dealerships provide local access to test drives, immediate inventory, and in-person support. Skilled sales staff can help buyers navigate trim levels, financing options, incentives, and trade-ins, which can be genuinely helpful for customers who prefer guidance rather than a fully self-directed purchase. Dealerships also play an important role in service and repairs, offering certified technicians, warranty work, and a physical location customers can rely on long after the sale.

However, dealerships can also create friction in the buying process. Variable pricing, opaque fees, aggressive upselling, and prolonged negotiations are common complaints. Because dealer profits often rely heavily on financing markups, add-ons, and service revenue, customer incentives do not always align with dealership incentives. This misalignment can lead to distrust, particularly among buyers who value price transparency and efficiency.

As electric vehicles move from niche to mainstream, dealerships must significantly raise their level of EV knowledge to remain credible and competitive. EV buyers arrive with different questions than traditional ICE shoppers, focusing on range, charging behavior, incentives, total cost of ownership, and home or public charging access. When sales teams cannot confidently explain these fundamentals, uncertainty replaces trust and customers disengage.

Dealers that invest in EV education, tools, and clear explanations position themselves as advisors rather than gatekeepers, creating a better buying experience and higher close rates. In an EV market where information is readily available online, informed guidance is no longer a differentiator; it is a baseline expectation.

Lectrium is Turning EV & Hybrid Complexity Into Clarity for Dealers

Lectrium removes uncertainty from the electrified vehicle shopping experience by offering critical technical details that are often missing from Vehicle Detail Pages. The platform presents complex EV and hybrid information in a clear, intuitive format designed specifically for how today’s consumers evaluate electrified vehicles.

Lectrium supports the full spectrum of electrified powertrains, from conventional hybrids to plug-in hybrids, battery-electric vehicles, and emerging extended-range EVs. It integrates directly with leading dealer website platforms, including Dealer.com, Dealer Inspire, DealerOn, and Dealer eProcess, as well as major CRM systems such as VinSolutions and CDK. Through these integrations, Lectrium delivers VIN-specific insights such as real-world vehicle range, nearby charging availability, fuel economy and cost comparisons, battery health visibility for used electrified vehicles, and accurate charging time estimates.

The result is a more informed shopper and a more efficient sales process. Buyers can quickly answer essential questions about range, affordability, charging access, and charging duration without waiting for a sales interaction. In turn, dealerships engage with customers who arrive better educated, more confident, and ready to make decisions.