Big Carmakers Aim to Take a Page From Tesla and Sell EVs Online

When second-generation car dealer Marc White learned a new Volkswagen AG electric-vehicle line was set to be produced in his home state of South Carolina, he hoped to be among the very first to start selling the cars. He approached the company, offering to build a $10 million showroom on a prime piece of local property at his own expense to showcase the models—and was turned down flat. That’s when White discovered VW plans to cut out the middlemen—like him—and sell its Scout Motors pickups and SUVs directly to consumers when they go on sale in 2027.“They obviously feel like they can do it better, or maybe less expensive,” says White, 45. His family has been selling VW automobiles for more than 60 years, starting with Marc’s late father, Steve, under whose name the dealership group still operates; his teenage son, who only just got his driver’s license, is eager to sell cars there someday, too. So White is fighting back, testifying to the state legislature that allowing the direct-to-consumer sales could put the livelihoods of his 150 employees at risk..For about as long as US drivers have been buying cars, they’ve been doing it through dealers, who distribute vehicles and allow in-person customers to do trade-ins, access financing and negotiate prices. But they also eat into carmakers’ profits, and some manufacturers are anxious to break free. Among the first to sell cars directly to consumers were then-upstart EV companies such as Tesla Inc., which famously built its own showrooms instead of establishing a dealer network. Now legacy automakers including VW and Honda Motor Co. are taking their first stab at direct sales with new EV brands like VW’s Scout line.If successful, they could upend the new-car market in the US—and the long-entrenched dealership industry, which Cox Automotive Inc. estimates sold $627 billion worth of new vehicles to auto buyers last year. But carmakers trying to sell straight to drivers face fierce resistance from dealers, who tend to be well financed, politically connected and protected by a thicket of state franchise laws that preserve their way of doing business.“Dealers don’t want direct sales to happen, because they have no interest in letting that dam break,” says Alexander Edwards, president of San Diego-based Strategic Vision, which surveys consumers and consults with automakers. “They want to keep their money flowing.”In South Carolina, direct-to-consumer auto sales aren’t actually legal, and an effort by the state legislature to change that has stalled following opposition from dealers, including White. Dealerships in California and Florida have also taken legal action to block VW from pursuing direct sales of the new brand. .For now, Scout’s reservation process looks much like that of any other consumer product. Consumers can go online, select either its sport utility vehicle or truck, choose between an all-electric or a range-extending plug-in hybrid model, then fill in their credit card information to put down a $100 refundable deposit. But that only gives the buyer a place in line, because the actual sale won’t be completed until Scout models go on sale in two years.“It should be that you can buy a vehicle in minutes on your sofa,” says Cody Thacker, Scout’s vice president for commercial operations. “It all should be as easy as buying a T-shirt on Amazon.”Buyers in California can also reserve online the new EV that Honda developed through a joint venture with electronics giant Sony Group Corp. ahead of its launch next year. Chief executive officer of the JV, Shugo Yamaguchi, described the purchase process as “a breeze without any hassle” in remarks at a January trade show.Dealers usually make a percentage from each vehicle sold, and top-end models tend to draw prospective buyers into showrooms, so the decision to sell directly to consumers hurts even more on a pricey model. (Sony Honda Mobility’s Afeela 1 Signature EV starts at $102,900.) “Honda should understand that any misguided attempt to bypass or undercut its US dealers will be challenged in statehouses and courthouses across the country,” Mike Stanton, president of the National Automobile Dealers Association, said in a statement.Dave Robinson, an executive at auto researcher Edmunds.com Inc. in Spokane, Washington, bought a Tesla Cybertruck last summer and relished the ease of the process and the transparent pricing from buying online. “I liked not having to spend half my Saturday in a dealership” and feeling like the salespeople were talking “to the Wizard of Oz behind the curtain while I’m waiting in the finance office,” the 44-year-old says. “Never again am I setting foot in a dealership.”.Of course, not everyone wants to buy a car without a visit to the dealership. Before a major outlay, many shoppers want to kick the tires and take test drives, which is why Scout is planning to open 25 locations in 16 major markets when it premieres in two years. But don’t call them dealerships: Some will be showrooms in malls, as Tesla has opened, while others will be standalone Scout “workshops” with show floors up front and service bays in the back. Scout workshops will look a little like a dealership, but customers will finish the transaction online.Although these kinds of changes require some investments, they also eliminate the cost of franchised dealers, allowing for greater profits. Tesla’s direct sales let it earn an extra $2,000 to $4,000 per car, car-industry executives have estimated. Dealers, for their part, have been trying to make the car-buying process less painful by digitizing parts of the process, including allowing for price negotiation via text or online chat. Still, car salespeople consistently rank among the bottom of Americans’ most trusted occupations, alongside lobbyists and members of Congress. “Car dealers are not all bad. We do bring some value to the table,” says White, the South Carolina dealer.Scout and Sony Honda have tried to get around franchise laws requiring automakers to sell through their dealers by establishing themselves as independent entities within their parent companies. Scout doesn’t fall under Volkswagen Group of America, the arm that contracts with US dealerships; it’s positioned instead beneath the wider Volkswagen umbrella company, so it could be treated like any other of its hundreds of legal entities, which include the luxury Porsche and Lamborghini brands. “You don’t see Volkswagen dealers selling Porsches or Porsche dealers selling Lamborghinis,” says Scout’s Thacker. Dealers don’t have “an unassailable right to another brand and another model of vehicle.”That’s not how VW and Audi dealers in Florida see it. They sued Scout in February to prevent the brand from selling directly to consumers in their state. Florida car dealers had their legislature update the state’s automotive franchise laws in 2023 to prevent this very thing. The new law says that if an auto manufacturer owns or controls more than 30% of an entity, it’s required to sell through franchised dealers. Scout is wholly owned by Volkswagen.Meanwhile, drivers report they’re increasingly open to purchasing online. Still, only about 5% of shoppers actually click “buy,” a January survey from Cox found. That might be because of limited purchasing options to date or because a car is more of a big-ticket purchase that consumers make only occasionally and so they don’t mind taking it a little more slowly.“People say that they want to buy a car with one click,” says Erin Keating, a senior director of economics and industry insights at Cox. But “the minute they get into monthly payments of $500 or more and you’re spending $50,000 on something, the quicker you see them saying, ‘I might actually want to talk to someone.’” —With Chester Dawson and Kara Carlson.Why Uttar Pradesh Trumps Gujarat In E-Rickshaw Adoption

Big Carmakers Aim to Take a Page From Tesla and Sell EVs Online

Now legacy automakers including VW and Honda Motor Co. are taking their first stab at direct sales with new EV brands like VW’s Scout line.

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