Scout Motors’ dealer drop-off program is exactly what customers want

Less than 12 hours after Scout Motors unveiled its all-electric hybrid vehicle last week, car dealers began threatening lawsuits.

Scout, backed by Volkswagen, thinks salespeople are history. It would like to sell its EVs directly to consumers, following in the footsteps of Tesla, Rivian, and Polestar in completely rethinking the car dealership business. But unlike those brands, it’s doing so while getting financial backing from an incumbent automaker: VW.

But if the company is nervous about challenging a century-old business model, it’s not showing it.

“Scout is a 100 percent different brand, a different organization, a different structure, differentiating everything,” Scout CEO Scott Keogh said last week, noting that the Scout shopping experience will be “transparent, very fast, and very easy.”

To make that happen, Scout Motors relies heavily on an in-house digital platform. “Scout Motors has no legacy,” said Cody Thacker, Scout’s executive vice president of growth. “We kept asking ourselves, if an OEM could start over, what would they do differently?”

This clean sheet approach attempts to reinvent the car purchase, one of the most loathsome financial transactions Americans go through. According to research compiled by Scout, the car buying experience consumes an average of 13 hours, 31 minutes per buyer. Only 8 percent of consumers rely heavily on retailers, resulting in more than 180,000 retailer-related complaints to the Federal Trade Commission each year. And nearly 70 percent of customers prefer independent service shops over dealer service because of issues like overcharging and delays.

Add in the fact that, nationwide, 49 percent of dealers are “not at all happy” to sell EVs, and Scout sees its reason for speeding up the experience. It also seeks closer control over customer data, allowing the company to target sales in specific areas, manage vehicle inventory, and adjust incentives to keep the company profitable.

“The biggest point that annoys consumers is that they want transparency in prices and they don’t want all the hidden fees and markups. “Only with a direct-to-consumer model can we address these issues and solve them,” said Thacker.

Scout envisions its sales platform as a place where customers can do all the things they used to do at a dealership, such as purchase equipment, set up service appointments, and get information about air updates. But instead of chatting with a human salesperson, they may encounter an AI-powered chatbot. (AI chatbots have been a mixed bag for various industries, but the automotive space, in particular, has struggled to make them work.)

Scout says it will launch 25 “Scout Workshops” and “Scout Studios” across the country over the next five years, where buyers will be able to drive and test-drive Scout vehicles. Indeed, automakers have tied themselves in knots, trying to rebrand and rebrand dealerships and service centers in different ways to avoid the negative impression they have on consumers and avoid the much-hated system.

The rendering Scout presented at the workshops is sleek and airy, with open work areas in full view of the customer areas, where car owners can sit and drink coffee while monitoring the work being done on their cars. In addition to brick-and-mortar locations, Scout will also offer consumers who live outside a 45-minute radius of the Scout Workshop the option to book mobile service through Scout-certified partners. Scout will also offer Scout Studios, which will serve as sales and marketing locations, similar to Tesla stores located in supermarkets across the country.

The decades-old sales model emerged in the early 1900s, when companies like Ford and GM often sold directly to consumers. As the auto industry took off, there was growing concern about monopoly practices, and national franchise laws arose.

Today, dealers have a hard time selling cars, although other companies like Tesla, Rivian, and Polestar have found workarounds. Hyundai is testing direct-to-consumer sales through Amazon (though with retailers involved), and Honda is selling its Acura EV exclusively online. Dealers made direct sales to consumers as difficult as possible, filing lawsuits and lobbying hard through their trade group, the National Automobile Dealers Association (NADA).

Of course, as soon as Scout announced its plan to go “Scout-to-Consumer” on Thursday, retailers began to rattle their sabers. NADA has announced that it will “challenge this and all direct selling efforts in courts and statehouses across the country.”

Another thing that makes this fight a little different is that Scout is very close to Volkswagen, and VW dealers have long wanted the company to introduce a truck in North America because they see it as a cash cow. Indeed, Scout says that at least two-thirds of bookings received since launch have been for the Scout Traveler SUV and one-third for the Scout Terra truck.

Of course, these are also the same vendors who argued that “Americans aren’t ready for EVs,” in an open letter to the Biden administration less than a year ago, saying that EVs were just sitting on their lots (although another study by the Sierra Club showed that the percentage of -66 dealers do not have EVs in their locations). NADA has been in an uphill battle with Tesla over its direct-to-consumer model for years.

The core of the conflict is, ultimately, data and who controls it. “Only through a direct sales model can Scout Motors get a full 360-degree view of the customer,” Thacker said. “This means we can have a complete impact on the customer journey. We can have unprecedented access to customer data, which directs deep customer insights, which can improve intelligence across the business. ” Retailers currently manage a lot of customer data and relationships, including financing, in the current model.

Scout seems unfazed by the vendor’s threats. In a statement, Scout spokeswoman Lindsay Bago said, “Just as using franchised dealers may be best for certain brands and their customers, using a direct sales model better supports our customers and our customer-first strategic vision as we launch a new vehicle platform, a new manufacturing facility, and and a new retail network.”

While Scout Motors has opened online bookings for its new Terra and Traveler vehicles that went live last week, the company has not yet finalized the details of its finance partner to buy or lease. The company could use VW’s big financial arm to manage the finances, though Thacker said part of the equation is still being worked out. “I think what we can say today is we want this to be seamless,” Thacker said.

Keogh, CEO of Scout, is confident that the model will work and support the consumer properly. “Scout wants to be old school,” he said The Verge last week, “We’re looking for a product that can have data trust and customer trust, because I think it’s finally come to a point where people are scared and rightfully so,” he continued. “We can control customer data, protect the customer, and de-badge our customers. So that’s what we’re looking to do, what we’re going to do.”