Colorado's recent decision to allow Scout Motors, a startup funded by Volkswagen, to sell directly to consumers has sent shockwaves through the auto industry. This episode explores the implications of this ruling, highlighting the lack of federal mandates on vehicle sales and the historical context of dealership networks. The hosts discuss the potential loopholes created by state laws and the reactions from traditional dealerships, emphasizing the ongoing debate about the value of direct-to-consumer sales versus franchise dealerships. Additionally, the episode touches on Ford's record number of recalls this year.
Today on CarEdge Live, Ray and Zach discuss the latest news from Colorado. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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"...each state developed their own franchise laws around that."
Each U.S. state has rules about how car companies can sell cars. These rules decide if a company must use regular dealerships or can sell straight to you.
Franchise laws are state regulations that govern how car manufacturers can operate dealerships and sell vehicles. They determine whether a manufacturer must use franchised dealers or can sell directly.
"...car dealers have been incredibly profitable for decades, over a century in some cases."
Most cars you see are sold at a car dealership. The company makes the car and then gives it to a shop that sells it to customers.
The dealership model is the traditional system where car manufacturers produce vehicles and sell them through independently owned or franchised dealerships.
"...outfit called Tesla came around and said, hey, you know what? We are not a typical car manufacturer...We want to be able to sell direct to consumer."
Some car makers sell cars through their own stores or online, skipping the regular car dealerships. This means they talk directly to you when you buy a car.
Direct-to-consumer sales refer to manufacturers selling vehicles straight to buyers without using traditional dealership intermediaries. This model allows companies like Tesla to control pricing, customer experience, and inventory directly.
"Lucid. Lucid can sell direct to consumer. Built in Arizona."
Lucid makes electric cars, like the Lucid Air. They sell their cars straight to buyers instead of through regular car dealerships.
Lucid Motors is an American electric vehicle manufacturer best known for the Lucid Air luxury sedan. Like Tesla, it sells directly to consumers without a traditional dealership network.
"We've now extended or we've now found a loophole, at least in the state of Colorado..."
A loophole is a missing rule that lets some companies sell cars directly to people even if the law usually says they must use dealerships.
A loophole is a gap or ambiguity in legislation that allows certain business practices, like direct EV sales, to operate legally despite broader restrictions.
"[513.4s] Because common sense would tell you that Scout is part of Volkswagen because, I don't know, the money for Scout came from Volkswagen. [524.6s] There is a deep knitted connection there that is hard to say doesn't exist."
The Scout is a new type of SUV that Volkswagen showed to give people an idea of what cars might look like in the future.
The Volkswagen Scout is a concept SUV that was announced by Volkswagen, showcasing future design and technology directions.
"I get both sides and I'm not particularly fond of the side that the head of the Virginia Automobile Dealers Association took, but I understand why he took it because they're the ones that pay his salary."
This is a group that represents car dealers in Virginia and talks to the government about rules for selling cars.
An industry group representing franchised car dealers in Virginia, often involved in lobbying and setting local sales practices.
"Everyone knows Scout Motors is owned by the German automotive giant Volkswagen Group, which relaunched the iconic American brand as an independent U.S. subsidiary focused on electric trucks and SUVs."
Volkswagen Group is a big German company that makes many car brands, like VW and Audi. They’re also getting into electric trucks in the U.S.
Volkswagen Group is a German automotive conglomerate that owns multiple brands, including Volkswagen Passenger Cars, Audi, Porsche, and others. It has recently expanded into the U.S. electric vehicle market through Scout Motors.
"Everyone knows Scout Motors is owned by the German automotive giant Volkswagen Group, which relaunched the iconic American brand as an independent U.S. subsidiary focused on electric trucks and SUVs."
Scout Motors is a new electric truck company that belongs to Volkswagen. They’re making trucks and SUVs that run on batteries.
Scout Motors is a U.S.-based subsidiary of Volkswagen Group that focuses on producing electric trucks and SUVs. It operates as an independent brand within the larger VW portfolio.
"So yeah, there's this carve-out, even though there is a distinct connection between Scout Motors and Volkswagen Group and between Volkswagen, Audi, Porsche, whatever."
Porsche makes high-performance cars and is part of the Volkswagen family.
Porsche is a German sports car manufacturer and another brand owned by Volkswagen Group.
"Now, Dad, one of the biggest parts of this story would be the National Automobile Dealers Association and their lobbying efforts..."
NADA is an organization that helps car dealers by talking to lawmakers and making rules easier for them.
NADA is a trade association representing automotive dealers in the United States, lobbying on their behalf.
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Happy holidays! Want to give your host a gift? Consider subscribing, rating, and reviewing the show this holiday season. It really helps the show grow. From all of us at Believe, have a merry Christmas everyone, and a happy holiday!
It's noon here, Inventor City, New Jersey, and our nation's capital, Washington, D.C., and this is Car Edge Live for, well, Christmas Eve, Wednesday, December 24th, with your hosts, Ray, here, Inventor, and Zach, hanging out in his apartment.
And I hope, I only hope, that you have gotten all your Christmas shopping done, and if you haven't, well, folks, you've got a little bit of time left. How are you doing?
Yeah, only a little bit of time left. It is eerily close. Eerily close? Eerily close?
Oh, something close.
Now, just like Wallace Shawn, the actor, was in the Princess Bride, and people just are always dying to hear me say, it's inconceivable! It's just inconceivable! So, for all of you who wanted to hear me say it's inconceivable, well, merry Christmas, there you have it. Thank you for that, Zach.
Do it again. Do it one more. One more.
Also, Dad, we've got no Christmas sweaters, no reindeer. Stay tuned. Maybe we will change clothes as part of today's show. The big story this morning, Dad, the state of Colorado.
People tuning in. This is a huge story. This is a tremendous story.
Well, the state of Colorado was kind enough and gracious enough to say to Scout Motors that, yes, you're a startup. You've never had a dealer network before, so because of that, you can sell direct to consumers.
As we all know, Scout Motors is the brainchild of, I don't know, a rather small automobile manufacturing concern called Volkswagen Group. It is Volkswagen's money.
Yes, they have set up a separate river in the process of building a manufacturing facility, I believe, in South Carolina, or North one of the damn Carolinas. And I don't mean the Carolinas are damn places. They're damn good places.
But the sticking point for most dealers is that since Scout Motors is really, in essence, tied to Volkswagen, that is not really a new concern that is independent of a manufacturer that has franchise dealership networks. And so that's the sticking point.
If I may, Dad, I want to go even higher level here to start. First and foremost, we've got no federal law that mandates that vehicles need to be sold from automakers to retailers, a.k.a. dealers, then to consumers.
And instead, they have to sell their vehicles to dealers and then dealers sell to consumers. So that's piece number one. There is no federal mandate here.
But may I say, the reason those state laws exist is because manufacturers decided early on that they didn't want to become direct to consumer. They needed a franchise dealer network in order to exist and sell their cars.
Because they didn't have the capital that it would take to build all those dealerships and places to do business.
Absolutely.
And then each state developed their own franchise laws around that.
Yeah, to be very clear, it's not like we ended up with car dealers because it was willy-nilly. This is highly strategic, this benefited manufacturers. And car dealers have been incredibly profitable for decades, over a century in some cases.
And so let's start there. There's no federal mandate, everything state by state. Now, when you look at things state by state, dad, there was no interest in selling direct to consumer until an outfit called Tesla came around and said, hey, you know what?
We are not a typical car manufacturer. Heck, we're not even a car manufacturer. That's just one line of business we have. We want to be able to sell direct to consumer.
Some states started to make carve out rules that would allow Tesla to sell their vehicles directly to consumer. And over the years, since then, we have seen other manufacturers such as Rivian, Sony even has gotten something with their Afila, stuff like that.
They've been able to carve out that they're able to sell directly to consumer. Now, Wikipedia has done a pretty good job documenting in every single state what the laws are that allow direct to consumer sales.
You can see here the first one, Alabama, no direct sales exemption. What that means is that it doesn't matter what type of vehicle manufacturer you are in Alabama, you are not allowed to sell direct to consumer.
You have to sell vehicles through a car dealership. Now, in Alaska, there's no specific prohibition of direct sales by manufacturers without franchise agreements.
Again, like we said at the outset, every state handles this differently. So if a manufacturer wants to go to Alaska and sell direct to consumer, they absolutely can right now.
There is no law prohibiting that. The issue obviously is it's Alaska. And so it'd be expensive. It'd be a lot different than manufacturing and selling directly to consumer in other states.
Now, in Arizona, manufacturers without franchise agreements can sell direct to consumer. So let's pause there, Deb.
What that means is that if you're a manufacturer who does not have an existing dealer network, you in Arizona could sell direct to consumer.
In Arizona, Tesla, for example, really, and they can sell direct to consumer.
Lucid.
Lucid can sell direct to consumer.
Built in Arizona.
Yep. Now, here's the rub, right? Here's the rub. What it says is manufacturers without franchise agreements, and you can already hop down here, guys, and see Colorado.
It says EV only, I'll highlight it, EV only manufacturers without franchise agreements.
Again, no federal law here. Every state treats it differently.
So in Colorado, EV only manufacturers without franchise agreements now, Deb, we're at the point that you mentioned, which is who are we fooling here?
Scout motors funded by spun out of Volkswagen Group. Does Volkswagen have no car dealers?
Of course Volkswagen has car dealers. Go down dealership road. You'll see a VW dealership and an Audi dealership.
This is a huge concern for car dealers. This is a huge concern for the NADA because, Deb, there's no blurred lines here.
We've now extended or we've now found a loophole, at least in the state of Colorado, but you'd imagine also in the states of California, Arizona, and many others that have similar laws.
We've found a loophole here. It doesn't matter if we look like, what's the saying? Looks like a cow. Smells like a cow.
Looks like a duck. Quacks like a duck. Walks like a duck. It's more than likely a duck.
Looks like Volkswagen's brand. Looks like Volkswagen funded it. Looks like Volkswagen came up with it, but nope, it's Scout Motors.
We can sell direct to consumer. This is tremendous. This is a huge moment in auto industry.
This is why lawyers exist. This is strictly why lawyers exist.
Because common sense would tell you that Scout is part of Volkswagen because, I don't know, the money for Scout came from Volkswagen.
There is a deep knitted connection there that is hard to say doesn't exist.
But yet, lawyers have an ability to parse words in such a way that common sense gets thrown the hell out the window.
To me, it doesn't make any sense. Am I trying to suggest that it's a bad thing?
I don't necessarily think it's a bad thing at all. Are dealers upset? They'll tell you it's a bad thing.
The guest commentary in Automotive News from the head of the Virginia Automobile Dealers Association will strongly suggest that it's a bad thing
because nothing's been better for consumers than the dealer franchise network that exists.
Look at all the people they employ in and look at the charities that they invest in and look at what wonderful corporate citizens they are in their local communities.
Forgetting the fact, for a moment, that they have devised ways to make it virtually impossible for two people to get the same price on the same vehicle.
Forgetting for a second that the sales practices are anything but consumer-friendly, whereas with direct-to-consumer from the manufacturer,
everybody pays the same price depending upon what the price is on that given day.
What's the legal term for BS? There's a lot less BS associated with buying a vehicle directly from a manufacturer than there is trying to deal with one of those manufacturers' franchise dealers.
I get both sides and I'm not particularly fond of the side that the head of the Virginia Automobile Dealers Association took,
but I understand why he took it because they're the ones that pay his salary.
For sure, Deb, but also I want to be very clear here. We're talking about sales, but dealerships provide a ton of value in parts and service.
Your vehicle needs a repair. You head to your local dealership in a lot of cases, but this, what we're focusing on today, is just about vehicle sales.
I want to spend another couple of minutes looking at, again, some of these carve-out rules because every state is different and it is kind of crazy that it really is.
You're in Connecticut and you're an automaker. You cannot sell direct-to-consumer. However, the Mohegan Tribe allows Tesla direct sales.
Delaware, you can sell direct-to-consumer, but only if you do not have a franchise agreement in place already.
Here in Washington, D.C., where I'm seated, you can sell direct-to-consumer, which is fascinating. Florida, you can sell direct-to-consumer, but only if you do not have existing franchise agreements.
Here's why I love Georgia.
EV-only manufacturers without franchise agreements that began sale before 2015, and oh, you can only have up to five stores.
This is how crazy it is to navigate this landscape. There are so many different rules.
And again, what makes this story so big this morning is everyone knows it's not news.
Everyone knows Scout Motors is owned by the German automotive giant Volkswagen Group, which relaunched the iconic American brand as an independent U.S. subsidiary focused on electric trucks and SUVs.
We have a new precedent being set by the state of Colorado.
Yeah, like I said before, it's not like you can't find the connection. It's not even like they've hidden the connection.
No, they're not hiding it.
And Volkswagen was the one that came out and said, we're starting a separate brand, Scout Motors.
Okay, we are funding it, so they're not hiding it.
They're trying to hope, and at least in Colorado, the case is, that there is a carve-out for it because it's a new manufacturer that doesn't have any franchise dealers.
And so they're going to be selling EVs, and in many states, it has to be for EVs.
So yeah, there's this carve-out, even though there is a distinct connection between Scout Motors and Volkswagen Group and between Volkswagen, Audi, Porsche, whatever.
I forget all their other brands that they sell in this country, that they're all part and parcel of a dealership franchise network, or a franchise dealership network, I guess, is the appropriate way to say it.
So there's no mystery other than, how can the state of Colorado, how can the legislators there in the state of Colorado, not see that connection or choose to ignore that connection?
Now, Dad, one of the biggest parts of this story would be the National Automobile Dealers Association and their lobbying efforts, because not only does NADA lobby at the national level, there are also local dealer associations that lobby at the local level.
I have a pop quiz question for you and our community.
There are 435 members of the US House of Representatives.
Those are the folks that work at the House of Representatives and are one part of Congress.
What percentage or actually what number, so there's 435 members, what number of representatives do you think received some level of lobbying dollars from or campaign contributions from the National Automobile Dealers Association in the most recent election cycle?
You want me to guess, you want me to guess a number? You said there's 435.
There's 435 and I'm asking what number of those 435 put in the chat to what number received campaign contributions, received lobbying dollars from the National Automobile Dealers Association.
My guess would be 435.
Okay, so we've got a couple of people guessing 435.
We've got a lot of people guessing 435, 428, 99%, 435, 436, which is an interesting guess.
I hate to disappoint, it's not quite that many, but it is still a significant majority.
372 of the 435 members of the House of Representatives received campaign contributions and 57 out of 100 senators received campaign contributions.
So I share this information because lobbying evidently pays the bills.
It goes a long way and to be clear, these dealership groups also lobby heavily at the local level.
So you've got national campaign contributions, you've got local campaign contributions.
You have a really entrenched dealer body in the United States of America.
Not only do you have state and local and national dealer groups, in large metropolitan cities where dealers spend a lot of money on TV advertising,
they have a de facto veto power over some of those TV stations in the sense that even if the TV station wanted to run an investigative story about automobile dealership practices in their market,
if it was a negative story, the dealerships that spend a poop ton of money on TV advertising would simply say if that story runs,
our multi-million dollar TV ad buy goes away.
My guess is that in many cases that story ain't gonna run.
And so it's not just the power of the dealer associations.
It's the power of the local individual dealers how they can structure the news regarding their business operations based on their particular ad buys when it comes to, in many cases, TV and radio.
So there you have that as well.
In my opinion, it's the absolute truth.
In his opinion.
All right, we continue on here.
Dad, let's switch gears, shall we?
Yeah, I don't have an opinion, yes.
Oh no, you certainly have an opinion on the next story.
Folks, we're going to head into the holiday with a very sad but cheery moment.
How many recalls?
How many recalls do you think Ford has updated, Dad?
Well, there's only one week left of the year for it.
And you know, this is going to be a pretty slow week for things like recalls because, well, hell, I don't know how to break anybody.
Nobody's working in a lot of these, in the C-suites of these major corporations.
But I would guess we're up to 152.
All right, so for those of you that are playing along at home, when do we look at this last week?
Yes, yes.
And it was what, 147?
I don't even, I can't even remember anymore.
The numbers just, as somebody would say, the numbers just huge.
The numbers are huge.
You are on money, on the money.
Folks, we've got some guesses here in the chat.
I love to see it.
And Dad, you are spot on.
152 recalls.
Yeah, yeah.
And if I remember correctly, the last time we looked at it last week was the latest recall was for light things.
And some other vehicles, because you could put them in park, but there was the option that you didn't know you got when you bought the car.
Where putting it in park would still allow it to roll away, which for a lightning owner was a godsend, but for others, not so much.
Yeah, unfortunately, Dad, you actually don't want your vehicle to roll away.
Yeah, we've got rear view camera issues.
We've got the parking brake issues.
Yeah, man.
And just the level set, so everybody understands.
The previous record for recalls in a given year was held by the General Motors Corporation.
Yep.
And it was 69 in a year, which was like a massively greater amount than its next closest competitor.
But Ford and people still stole the virtues of Ford because they say, well, at least they're addressing these issues.
They're acknowledging and addressing.
Acknowledging and addressing.
Aren't you better off if you don't have issues to acknowledge and address, but that's just me, in my opinion.
Very sure.
And I think the two things that make this so challenging.
One, they make hardware, all right?
So many of these things are hardware related.
Some are software related, and so they can get quick updates out, which I don't want to, excuse me, diminish.
Some of these things are software related, but many of them are hardware.
Two, you're breaking the record by tripling it.
Pretty close.
Yeah, pretty close to tripling it.
What more can you say?
You're much closer to doubling it than you are to tripling it.
Double would be 138.
Okay, okay, sorry.
I was naming 59 in my head.
We're nowhere near 206.
You're right, you're right.
Excuse me, I apologize.
Yes, we more than doubled it.
I think if you were one or two recalls over the record, okay, it's a new record, but it's like, you know, it's not like Barry Bonds on steroids.
Like, we're at like...
This truly would be the case where Wallace Sean would say, this is just inconceivable that one manufacturer could have 152 recalls in a year.
That is nearly, you sitting down, I'm not real good at math, but that's nearly three recalls a week, because three recalls a week would be 156 if I'm not mistaken.
So, we're just four away and we got a week to go, ladies and gentlemen.
So, you know, the opportunity is there for them to manage to get up to three recalls a week and be at 156 recalls a week.
There are only four short.
There's a chance, folks.
There's a chance.
Again, a friendly reminder, caredge.com.
If you're in the market to buy a car, sell a car, protect a car, do all the car related things, please.
Check out our website.
Six years now, we've been working on caredge.com.
And, Dad, I think we should end today's show by reviewing a few of the most recent reviews we've gotten over on TrustPilot from Angel Williams.
Concierge, yes, please.
Excuse me.
Sorry to put into words how easy and fulfilling this process was.
First, I'll start by sharing that both my Concierge members, Debbie and Maggie, were amazing.
They recently gave birth, so having Maggie speak with the sales team on my behalf was so helpful and saved me so much precious time while my car was bought.
I cared for my newborn and spent time with my mother during the last day of her visit.
That time is priceless.
Once I actually walked into the dealership, the process was easy and there was zero pressure.
I love this experience.
We'll probably never buy a car the regular way again.
What an incredible story here from...
Can I say, honestly, that the regular way is really the irregular way.
It shouldn't be as difficult as it is to...
And car dealers will say, well, it's not difficult.
If you just pay the price we're asking for it, we can get you in and out in no time.
Okay?
But yeah, it's the irregular way of doing business for most car dealerships.
Yeah, unfortunately.
Obviously, there are good dealers out there, but few and far between.
We've got another one here down from Scott, helpful, especially for doom scrollers.
It's nice to have access to all sorts of data in one location.
The AI negotiators hit or miss, but the site's overall value is definitely there.
We'd purchase this plan again if I'm actively searching for a car.
Really proud of the improvements we've made over on the AI side too.
So excited to see that feedback from Steven here.
Courage was very helpful to me.
Helpful in me.
Courage was very helpful in me purchasing.
There we go.
Wait, leave it alone.
No, leave it alone.
But...
Leave it alone.
Leave it alone.
In me purchasing a new vehicle for my family.
Thomas was very informative.
He took all the hard work out.
I was able to go to the dealership with everything laid out for me.
I was able to get an even better deal than I expected.
I'll definitely be calling for my next car purchase from Jorge here.
I'm skeptical at first, but a truly geared experience.
I had read all the online positive reviews, seen their content on YouTube,
and decided to pull the trigger.
I got the car I wanted with savings both in my pocket and time.
I highly recommend, unless you enjoy the puzzle with dealerships.
Anyway, folks, wanted to end with some happy thoughts there with regards to the incredible work our team has done this year.
If we can support you, we would be humbled and privileged to do so.
Dad, let's wish everyone a Merry Christmas.
Enjoy the holiday tomorrow.
We will be back on Friday, so please tune in then.
That's my plan.
Yeah.
We're going to be back here.
But take it tomorrow off to enjoy the holiday, enjoy some time with family,
and Merry Christmas to everyone who celebrates.
Yes, absolutely.
Merry Christmas.
Happy New Year.
Happy Kwanzaa.
Happy Hanukkahs for those that are hungry.
Happy Festivus for the rest of us.
For those of you who need your Festivus poll, get it out,
and get ready for, well, the most Festivus time of year.
Folks, we're back on Friday.
Dad, I love you.
Enjoy the afternoon.
I love you as well, handsome.
Thank you, everybody, for being here.
Have a great day tomorrow.
Enjoy your family and friends, and we'll see you back here on Friday.
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