Brian Maas Breaks Down California’s Lawsuit Against Volkswagen and Scout

Scout Motors’ approval to sell vehicles directly to consumers in Colorado has reignited debate around dealer franchise protections and OEM competition. On this episode of Inside Automotive, Brian Maas, President of the California New Car Dealers Association (CNCDA), unpacks the legal and market implications of the decision and what it could mean for dealers nationwide.

Maas explains why CNCDA, with support from NADA, filed suit against Volkswagen and Scout Motors, arguing that direct-to-consumer sales violate California franchise law. He discusses how the Colorado ruling may prompt dealer associations in other states to reexamine their statutes and enforcement mechanisms. Beyond the courtroom, Maas shares insights on broader industry trends, including EV sales normalization, rising vehicle affordability challenges, and intensifying competition in the used-car market. The conversation also looks ahead to key legislative priorities in California, from gubernatorial turnover to compliance preparations for the upcoming CARS Act. Together, these developments highlight the growing intersection of policy, retail strategy, and consumer access in today’s automotive market.

Discussion topics include:

• Scout Motors’ direct-sales approval in Colorado
• Legal challenges surrounding OEM direct-to-consumer models
• Franchise law protections and state-by-state enforcement gaps
• EV sales trends in California versus the national market
• New-vehicle affordability and used-car inventory pressures
• Legislative priorities facing California dealers in 2026

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Transcript

Scout’s Direct Sales Shockwave

SPEAKER_00 0:06

Thanks for watching Inside Automotive with Jim Fitzpatrick.

Jim Fitzpatrick 0:11

Hey everyone, Jim Fitzpatrick. Welcome to another edition of Inside Automotive right here at cbtnews.com. We wrapped up 2025 with Scout Motors making waves across the industry with plans to sell directly to consumers. That decision raised serious questions about dealer rights and what this could mean for the future of retail automotive across the country. Joining us now to give his perspective on that, as well as an update on how California dealers are positioned in this new year is Brian Moss. You've seen him here before at CBT News. He's the president of the California New Car Dealers Association. Thank you, Brian, for taking the time and your busy schedule there at the association to spend a minute with us here at CBT.

SPEAKER_00 0:50

Great to be back with you, Jim. Thanks for having me.

Jim Fitzpatrick 0:52

Yeah, so back in April of 2025, your association filed a lawsuit against Volkswagen and Scout Motors for violating California's franchise laws, which have been in place for many, many years. Now we see Colorado's approval of Scout Motors dealer's license. And uh what what was your initial reaction to that decision?

California Franchise Law And The Lawsuit

SPEAKER_00 1:13

I think that's un, it's unfortunate that uh frankly uh VW and Scout get any traction in their effort to uh shortchange their franchise dealer business partners. Yeah. Uh and that really is the focus of our lawsuit. Um California's law is an anti-competition law, and it clearly states that uh an automaker that has franchisees or any of their affiliates, which in our view Scout clearly is an affiliate of uh Volkswagen, uh, they need to use franchise dealers. Yeah. Obvious ideally that would be VW dealers or Audi dealers or Porsche dealers, um, but they need to use franchise dealers in order to comply with California's law, and they're not doing so. And so we sued him uh in a suit that's now in federal court in San Diego.

Jim Fitzpatrick 2:08

Yeah. Wow, that that's amazing. Still amazes me that uh you've got car companies like Scout and uh that even decide to go on to go down this road of direct to consumer. Uh I felt that way about Tesla, I felt that way about Rivian, but in this case, it's even more so because here Volkswagen's got a network of dealers already built across the nation through all of their brands, and those brands happen to need right now a little boost in their lineup of vehicles, right?

SPEAKER_00 2:36

For sure. Uh I think uh you talk to any VW dealer across the country and they would love to sell a pickup or an SUV. They don't have a pickup in the VW lineup in the United States. So they uh welcome with open arms the chance to sell uh uh Scout vehicles. It's unfortunate that uh VW and Scout have made this decision to uh try and sell directly, uh, but we think it violates California law and we're gonna prove it in court.

Jim Fitzpatrick 3:09

Good, good. Given what's happening right now, what steps should dealers and dealer associations be thinking about to protect the franchise system and their businesses? Obviously, you took the biggest step right there with the lawsuit. Is that you the way you see these other states and associations following?

National Stakes And NADA Support

SPEAKER_00 3:24

No, I I I I would encourage other states to look at their laws and uh analyze whether it sufficiently protects uh franchise dealers from just this kind of competition. Uh several states have strengthened their laws in the last few years, uh, and others probably need to take a closer look at their statutes. And by the way, I want to give a big shout out to uh NADA. Uh they're helping us fund our lawsuit. This is a national issue. This is not a California-specific issue. Um, if Scout gets away with this, who knows what other automakers will try. So we're really grateful for the support of the NADA board and organization in helping push our case forward.

Jim Fitzpatrick 4:13

Yeah, that's great. That's fantastic. It it and it and it's gonna take a big, you know, uh strong association like yours, NNADA, working collectively, you know, to take on a company like Volkswagen, right? One of the largest uh you know manufacturers out there across the world, right?

SPEAKER_00 4:29

For sure. Yeah, I mean they're a they're a large multinational corporation with multiple brands, as we uh mentioned a few minutes ago. Um, and we feel like this is a precedent we need to stop. And uh we also sued uh Sony Honda in LA Superior Court in California last August on the same grounds uh that they are competing with their Honda and Acura dealers by trying to sell a Fila vehicles to California customers directly. So that case is also pending.

Jim Fitzpatrick 5:04

Sure, sure. Shifting gears for a moment here, your association's Q4 outlook hasn't yet been released, but uh based on what you're seeing, how did California dealers close out 2025?

Market Snapshot And EV Pullback

SPEAKER_00 5:16

Uh I think I think they close it out pretty well. Um obviously it uh it's gonna be a little brand uh dependent.

Jim Fitzpatrick 5:24

Sure.

Affordability Crunch And Used Car Shift

SPEAKER_00 5:25

Um, we fully expect when our report's issued, probably in the next week or two, that uh EV sales will have dropped uh significantly uh from uh the highs of the third quarter, uh, where there was a lot of pull forward sales in August and September with the expiration of the federal tax credit. Um and I think a lot of those EV customers that otherwise would have bought a vehicle in November bought it in August instead. Um so we're expecting some uh significant uh pullback in the EV market. But overall, I think things were solid. Um, you know, we're not in the post-COVID era where dealers were uh, you know, uh making incredible uh profits. We're past that. Yeah. It's more of a uh a normal market. And I think you've already seen some of the national numbers. Sales did uh creep up. I think the SAR is over 16 million. So I that's all that's all good news. Yeah. I think the real challenge going forward though is um new cars are just too expensive. And uh it's really difficult for folks in um the the lower end of the market to find a vehicle um that they can purchase with the um with Nissan's announcement that they're no longer selling the Versa. There is no new car available in the United States under$20,000. That's hard to um that's hard to imagine. And the average price of a new car is over$50,000 now. So uh I I think you know, those are potential storm clouds on the horizon for the industry in California and across the nation.

Jim Fitzpatrick 7:13

That's right. That's right. Everyone's I think got their eye on that. Um OEMs are trying to figure it out as well, obviously dealers, which puts even that much more pressure on the used car market because there's been a lot of people that have been new car buyers uh until recent, where they're like, you know what, I'm gonna take a closer look at a used car, buy it, buy maybe a three or four-year-old used car, save a little bit of money because these new cars are just getting crazy in terms of, you know, like you said, over$50,000 for the average new car. And where's that going? For sure.

SPEAKER_00 7:42

And I think I think the competition in the used car marketplace is probably as intense as it's ever been. You've got large national players like Carvana and Carmax and some of the bigger new car brands, uh, you know, Echo Park that Sonic has and other things. They're all competing for these cars that you identify, the ones coming off lease or uh still CPO uh uh eligible vehicles. Everybody wants those cars. That's right. And of course, what that does is it puts pressure on pricing of used cars as well. I read a story uh recently that a lot of dealers are keeping uh vehicles that they receive in trade that might be eight or 10 years old. And instead of wholesaling those, they're keeping them in inventory in the hopes that they can attract customers who are looking for more affordable vehicles. Yep. Um I've been in the case.

Jim Fitzpatrick 8:43

I've spoken to a number of dealers that have said that same thing that the, you know, if a car's got 80 or 90,000 miles on it, no longer is that wholesaled. That's brought up right to the sales uh area of a of a used car center and they're retailing it.

2026 Agenda And Compliance Priorities

SPEAKER_00 8:56

Yeah, and if a custom customer comes in the door and says, you know, I can't afford to pay 20 grand for a used car, your that car becomes attractive and sellable for the dealer. That's right. And uh that's the great thing about working in this industry is dealers figure out a way to meet the needs of customers. And if it's retaining older used cars, they're gonna do it.

Jim Fitzpatrick 9:19

That's right. What's on your agenda for the association as we go into 2026?

SPEAKER_00 9:25

Well, it's uh it's an election year in California. Uh Gavin Newsom is termed out as our governor. So uh we've got a big gubernatorial election. We're watching that uh closely. Um, and our legislature is back in session for 2026. Um and uh we're waiting to see what kind of bills get introduced. Uh we had a major piece of legislation, the California Cars Act uh enacted last year. That's gonna take effect in October. Uh, and we're working diligently with some of our uh compliance partners to ensure that dealers have the forms and the processes they need to fully comply with that law. So as usual, uh plenty going on uh in California.

Jim Fitzpatrick 10:17

That is for sure. I think you're the ninth, isn't California like the ninth largest economy in the world or something?

SPEAKER_00 10:22

I mean, it's just it's the uh depending on uh the month, it's either the fourth or the fifth largest in the world.

EV Adoption Drivers And Limits

Jim Fitzpatrick 10:31

Sorry about that. Wow, it's a country onto itself, but uh very, very interesting. And and what do you I mean, obviously they did away with the the the incentives um last year that we were just talking about for EVs. Do you do you think though EVs will continue on a uh still to garner a pretty big share of the market there in California? I mean, you guys with your gas prices and and people that are concerned about the environment, um, you you were leading the country in EV sales for so long.

SPEAKER_00 10:58

For sure. Yeah, um again, we don't know the fourth quarter numbers, but uh we've been averaging roughly 20% of our new car sales have been EVs. That's well over three times the amount uh nationally. Yeah. There'll be some pullback in that, but um uh for the reasons you outlined and many others, yeah, Californians uh are uh love to embrace new technology. Yep. And uh in the personal transportation space, EVs are the new technology. So I expect that trend to continue. Uh it just probably won't be at a 20% clip. It'll be something lower than that.

Jim Fitzpatrick 11:43

I don't have the numbers in front of me, but I'm I'm sure it's it's uh a strong number. Everyone I talk to that drives an EV, it's either their second, third, or fourth EV, and they tell me that my next purchase will be an EV. They don't miss going to the gas station. You know, they don't they don't worry about taking long trips, even though it might take them an extra hour out of their way to get a charging station. It seems as though EV people stay with EVs. Not not all of them, but is that a safe number? I mean, is that a safe assumption that it's a pretty high number of those consumers that repeat their next purchase with an EV?

Closing Concerns On Industry Precedent

SPEAKER_00 12:18

Yeah, I think it is. Uh a lot of consumers lease these vehicles, so it's attractive to spin into another uh leased EV. Most of the major manufacturers have uh electrified products available, whether they're hybrids or plug-ins or full EVs, so there's uh options available to consumers that didn't exist before. Um, I think the key thing for uh EV adoption, if you have convenient charging where you live, um having an EV is no problem. Right. If you live in multifamily housing in an apartment building, or you don't have a level two charger at your house, you're it's gonna be difficult for you to transition. So you already plunked down the money for a charger uh in your garage, why not have an EV? That's right. Yeah, for all the reasons we outlined. Yeah, very good. But if you don't have a charger at home, I think a lot of consumers are thinking twice about wow, do I how do I charge this thing and how do I um avoid gas stations? And I think right now with gas prices relatively uh low, um gas and hybrid vehicles are taking off.

Jim Fitzpatrick 13:39

Yeah, yeah. It's interesting. Interesting to watch. Wow. Brian Moss, the president of the California New Car Dealers Association. Thank you so much for giving us some time here at CBT News. It's always great catching up. Uh obviously, we'll be following, as everyone will be, that lawsuit against VW. And uh uh it's it really the the you know the the industry's kind of upside down since they got a Colorado dealer's license to say, uh-oh, you know, when's it gonna happen in my state? Well, you know, is this it's a it's a major, major concern of many dealers, right?

SPEAKER_00 14:09

Yeah, for sure. And uh it doesn't matter whether you're a VW dealer or any other dealer. Uh if if that's right, if this gets traction, it could uh really uh upset the industry.

Jim Fitzpatrick 14:21

I agree. Thanks, Brian. Really appreciate it.

SPEAKER_00 14:24

Thank you.

Jim Fitzpatrick 14:25

Thanks, best of luck to you. Thanks for watching Inside Automotive with Jim Fitzpatrick