Inside Automotive with Jim Fitzpatrick, powered by CBT News

Scout Motors’ License and Franchise Implications – Matthew Groves

• Jim Fitzpatrick • Season 1 • Episode 49

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On this episode of Inside Automotive, Matthew Groves, CEO of the Colorado Automobile Dealers Association (CADA), discusses the implications of Scout Motors being granted a dealer license in Colorado, a move that has sparked national attention among franchised dealers. Groves examines the legal, regulatory, and market factors at play, emphasizing the risks such decisions pose to the franchise system and the broader dealer network. He also outlines how Colorado’s unique EV market, legislative constraints, and Volkswagen’s involvement create a complex landscape for automakers and dealers alike. The conversation highlights the importance of advocacy, strategic preparation, and vigilance as the industry navigates new EV entrants and evolving regulations.

Don't miss:

  • Details of Scout Motors’ Colorado dealer license and its limitations
  • Legal and regulatory concerns regarding franchise laws and manufacturer influence
  • The EV market in Colorado and its impact on dealer strategies
  • Challenges for dealer advocacy and procedural vulnerabilities
  • The role of CADA in preparing defenses for franchise dealers
  • Colorado automotive market performance and outlook for 2026

Inside Automotive with Jim Fitzpatrick is powered by CBT News, your go-to source for the latest news, trends, and insights in retail automotive. Subscribe for more interviews with top industry leaders, dealership innovators, and experts shaping the future of automotive.

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Jim Fitzpatrick:

Welcome to Inside Automotive with Jim Fitzpatrick. Scout Motors has been granted a dealer license in the great state of Colorado. Joining us now to share his perspective on what this decision means for dealers in his state and the industry overall, as Matthew Groves, CEO of the Colorado Automobile Dealers Association. Thank you so much, Matthew, for taking the time out of your busy schedule. What I would imagine is a very busy schedule this morning, but dealers are probably calling you left and right, going, Matthew, what's going on here? So uh so talk to us about this. I mean, this news hit not just at CBT News this morning, but also automotive news, and I'm sure a number of the other podcasters out there are talking about this as well. So this is this is a big move, and it's the first state they've jumped into, right, with a license.

SPEAKER_00:

Yeah, absolutely. You know, this is gonna be the first step in a long process for us. One of the things I would point out is that our daily report reported out yesterday that this license is till October of 26th. So they're not gonna have any product to sell for the duration of this license. It's gonna take a renewal before they can sell the first scout.

Jim Fitzpatrick:

Ah, interesting.

SPEAKER_00:

The only thing this allows them to do is sort of validate the eight-month-long string of unlicensed sales activity they've been conducting in this state.

Jim Fitzpatrick:

Okay, wow, that's very interesting. Okay. Now, they of course argue in this whole situation, they have been that it's an independent brand. Um, what say you on that?

SPEAKER_00:

I mean, nobody's gonna argue themselves out of existence, right? Uh you can say that there's necessary language for affiliate, but at the end of the day, uh, Scout is not an affiliate of Volkswagen, they're an alter ego. There's only one investor, there, there's only one engine inside the car. Uh this is a part and parcel of Volkswagen. So to say anything else would be disingenuous, but they've said something else convincingly.

Jim Fitzpatrick:

Yeah, yeah, for sure. Now, this is the first um of 25 markets, right, that they've identified where they want to have brand-owned rooftops. Um, so so talk to us about that. I mean, I uh it I'm sure that these the other 24 states are now looking at this going, uh-oh, you know, we've got Colorado here that uh where they've gotten approved for a dealer's license and now they're coming after us.

SPEAKER_00:

You know, Colorado is an extremely friendly EV state, right? We've had even after the expiration of tax credits, we're hanging around 26% of market penetration for EVs and plug-in migrants. So uh I think that this isn't a unique market and a unique circumstance on the fact that our state really wants to hit that 940,000 EV mark by 2030, and they are are really making themselves nimble in ways to facilitate that goal.

Jim Fitzpatrick:

Right, right. Have they been in touch with you or your team since this at all to talk anything through?

SPEAKER_00:

Or um, you know, I don't really want to get too much into the mechanics of of the decision because this might not be the end of the conversation for us. Right. But you we have had some talks uh with with various outlets about what is coming next, and I think our board will decide what is coming next uh later this week.

Jim Fitzpatrick:

Yeah, I bet there's some uh very unhappy Volkswagen and Audi dealers out there with this news, right? In your state?

SPEAKER_00:

You know, I and that's something I think you're you're spot on. This article that came out a couple of days ago where Scout announced that they may potentially also start manufacturing uh Audi and Porsche, uh, that should be very concerning, not just for Volkswagen dealers, but uh, you know, dealers across across the board. I think, you know, my background is in national security, and one of the things that we look at is we just consider this asymmetric warfare. We have we have done a great job in protecting the dealer body and the franchise dealers for so long that people are poking around every edge to try to find a vulnerability. And you know, uh the burden is upon us. We have to be right every time. Uh they only have to be successful once.

Jim Fitzpatrick:

Right, right. And you guys have been been for so many years, you've been able to, you know, keep this at bay and and you know, beat this in uh when it comes to the state legislature. Talk to me about that. Was there a was there some sort of a weak link there or something?

SPEAKER_00:

Or um, you know, timing by uh Colorado Constitution, our session is 120 days. We were running up against the very end, uh, and it looked like we were not gonna have enough time to get it done. So uh certainly we might come back with a bill that that would specify what unfair manufacturer competition is, but you've got to remember our bill last year was about affiliates, and affiliate really doesn't apply to Scout because they are more of an alter ego or a straw man corporation that was spun up for the specific purpose of sidestepping franchise laws.

Jim Fitzpatrick:

Interesting, very interesting. So uh it's gonna be interesting to see uh how other manufacturers look at this as well, right? I mean, I'm sure that this is uh being discussed right now in other OEM conference rooms, right?

SPEAKER_00:

Uh, you know, I I wish I had a seat in other OEM conference rooms because that would be great intel for us. But uh uh our goal is to go forward and uh, you know, develop defenses for this new line of attacks. I think that we will be successful in that the way that we have been successful over the past several decades in protecting dealers. Uh the other thing that I think is is important to note is that uh, you know, we have this section of franchise law not just for the protection of the franchise dealers who make these uh notable investments in the manufacturers, they're there for the protection of consumers so that consumers don't run into a spot like they did during the recession when manufacturers started going out of business.

Jim Fitzpatrick:

Yeah.

SPEAKER_00:

And so, you know, when the dealers stand the line with their customers, that is a very powerful force. Yeah. And I know that Colorado has a great interest in protecting those customers.

Jim Fitzpatrick:

Yeah, without a doubt. To take to be the devil's advocate for just a moment, what do you say to the people, maybe the consumers in Colorado, that say, look, it's a free market system that we're in. If a manufacturer wants to sell directly to us, go ahead and let them, and then we'll let we'll decide as consumers, you know, how best to purchase a vehicle or which way is a better way through a franchise or directly with the consumer. What what what do you say to those consumers that might feel that way?

SPEAKER_00:

Sure. You know, it's a double-edged sword because when those manufacturers go belly up, then you're left holding the bag. And we don't want to put consumers in that position. What I would say is this is not about direct to consumer sales either, right? Tesla sells in this state, Rubyan sells in this state, Lucif sells in the state. The only reason that Scouts should not be selling in this state is because they've undertaken contracts with 12 Volkswagen dealers not to compete with them in exchange for the multimillion dollar investments they've made.

Jim Fitzpatrick:

Right, right. Yeah, that's a very good point. Very good point. Because as you know, it takes millions and millions of dollars to build these showrooms and buy this uh prime real estate and have a staff of 100, 150, 200, maybe even more, to staff these dealerships and to be, you know, basically, you know, kicked like this uh from your manufacturer to s for for a scout to be doing this or VW to be doing this, it it really is is very, very troubling to say the least, right?

SPEAKER_00:

You know, it's a huge breach of trust. And as I continue to talk to Volkswagen dealers, uh it I expected anger. And what I what I'm hearing is just disappointment.

Jim Fitzpatrick:

Right, right, for sure. Um while I've got you here, uh let me switch gears a little bit. How is business in the state of Colorado among your dealers now?

SPEAKER_00:

You know, we're actually holding pretty strong. We're we're looking at about 215,000 sales uh in 2025, which is on par with what we've seen over the last uh couple of years. You would you would think that rising interest rates, tariffs, affordability issues would really have a negative impact on that market. That's not something that we've seen here.

Jim Fitzpatrick:

Wow, that is just incredible. And of course, you're probably planning for an incredible 2026. Is there anything on your to-do list uh that you want to get done uh next year?

SPEAKER_00:

You know, our mission uh really is to just clear the path for dealers to do what they do. They know how to sell cars, consumers want to buy cars, and we just want to make that process as as seamless and as easy as we can for all of our customers.

Jim Fitzpatrick:

Sure. Is there anything that you would like your members to do there in Colorado to help you fight this situation? Uh I know that as a former dealer myself, I kind of let, you know, to my fault, I let the uh the association worry about these things. I didn't get too involved, but um not necessarily that that was the right thing to do, but what can the dealers do and your members do now to help you and your efforts at the association to combat you know uh things like this?

SPEAKER_00:

Sure, you know, that's already happening. If there, if there is sort of a silver cloud to this line in, is that one, we still have multiple options in front of us, but two, I'm hearing from dealers that I haven't heard from in a while. There is a lot of energy behind this issue, and there is a lot of uh just sort of anxiety about what do we do next. And I think that when we have everybody at the table, we're absolutely going to make the right decision, and I don't I don't know that there's gonna be any stopping them.

Jim Fitzpatrick:

Yeah, that's fantastic. That's great. Matthew Groves, CEO of the Colorado Automobile Dealers Association. Thank you so much for, as I said, taking the time out of your busy schedule there to join us here at CBT News and uh help get the word out and get it was very valuable to get your perspective on this because I know a lot of people are talking about it. Of course, I appreciate you having me. Awesome. Thanks so much. Thank you.