Colorado dealers sue state over Scout Motors dealer license approval

A group of Colorado dealers are contesting the state’s authorization for Scout to sell vehicles directly, citing EV definitions and ties to the VW Group.

On the Dash:

• Colorado dealers are challenging the state’s approval of Scout Motors’ dealer license, arguing it violates state law’s franchise and EV-only provisions.
• The lawsuit centers on Scout’s extended-range powertrain and alleged ties to Volkswagen Group, which dealers say disqualify the brand from direct sales.
• The case could have broader implications for direct-to-consumer vehicle sales and franchise protections nationwide.

A group of Colorado Volkswagen, Audi, and Porsche dealers have filed a lawsuit challenging the state’s decision to grant Scout Motors a dealer license, a move that dealers say misinterprets state law and weakens franchise protections, as reported by Automotive News.

The lawsuit, filed on January 20 in Denver District Court, aims for judicial review of the Colorado Motor Vehicle Dealer Board’s December 16 decision to approve Scout’s dealer license. At the same time, plaintiffs argue that the Department of Revenue misclassified Scout as an EV-only manufacturer and minimized Volkswagen Group’s financial and operational connections to the brand. 

Ten Volkswagen, Audi, and Porsche dealerships are listed as plaintiffs, among 28 such dealers in Colorado, with the potential for additional dealers to join the suit.

Sign up for CBT News’ daily newsletter and get the latest industry stories delivered straight to your inbox. 

Colorado law generally prohibits manufacturers from owning or operating dealerships, with limited exceptions for EV-only brands that do not already have franchised dealers in the state. Regulators, however, concluded that Scout qualified under those exemptions.

Conversely, dealers dispute that interpretation, pointing to Scout’s plan to offer an extended-range electric system alongside fully electric versions of its Traveler SUV and Terra pickup. The lawsuit argues the system functions as a plug-in hybrid, which would disqualify Scout from exemptions intended for EV-only startups such as Rivian and Lucid.

The suit also claims Scout is an alter ego of Volkswagen Group and its U.S. subsidiaries, including Volkswagen Group of America, Audi of America, and Porsche Cars North America. Since those manufacturers already operate franchised dealerships in Colorado, the plaintiffs argue Scout should face similar restrictions.

It is important to note that the Motor Vehicle Dealer Board approved Scout’s license by a 6-2 vote, which included three new-vehicle dealers, three used-vehicle dealers, and three public members.

Unlike similar lawsuits in Florida and California, the Colorado case does not name Scout or Volkswagen as defendants. Instead, it challenges the state agency’s interpretation of the law.