Dealers Sue Scout, Musk Refocuses on Tesla, AI Meets Retail

Automotive State of The Union

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Episode #1026: California dealers are taking legal action against Scout Motors over its direct-sales model. Elon Musk plans to scale back his government role amid Tesla’s slumping sales. And new code reveals OpenAI may soon integrate Shopify directly into ChatGPT, turning the AI into a full retail assistant.

The California New Car Dealers Association is going to court over Scout Motors’ retail strategy, saying the VW-owned startup is sidestepping franchise laws and undercutting the state's dealer network.
- Dealers claim Scout violates California Vehicle Code Section 11713.3, which bars automakers from bypassing franchised dealers if the brand is affiliated with an existing franchise network.
- A 2024 amendment clarifies that new EV brands under a legacy OEM must sell through franchised dealers if they share ownership.
- CNCDA argues that VW can’t legally claim Scout is “independent” when it's wholly owned by Volkswagen AG.
- The association says VW dealers are being unfairly excluded from selling Scout’s high-demand electric SUVs and pickups, and the lawsuit seeks over $35M in fines, plus a full sales halt and deposit freeze in California.
- “Illegal competition will harm not only dealers but also the communities and car buyers that they serve,” said CNCDA President Brian Maas.

Elon Musk says he’ll scale back his government work next month and refocus on Tesla, where sales are dropping, margins are thinning, and investors are restless.
- Musk says the “slog” of setting up the Department of Government Efficiency (DOGE) is mostly done, but still plans to spend 40% of his time on it.
- Tesla stock jumped 5.5% after Musk’s remarks on an earnings call; shares are still down nearly 50% from their December peak.
- Tesla’s Q1 revenue missed estimates at $19.34B, with auto revenue down 20% and net profit down 71%.
- Musk reiterated support for lower tariffs but acknowledged Tesla isn't immune to "macro demand for cars," noting that economic uncertainty leads consumers to "pause on doing a major capital purchase like a car."
- Tesla is on track for a mid-2025 launch of an affordable EV and a June debut of its Austin-based robotaxi fleet.

OpenAI is setting the stage for ChatGPT to become a full-fledged shopping assistant, as new code hints at a direct integration with Shopify that could streamline the entire purchase journey—from query to checkout.
- Code found in ChatGPT’s public web assets includes tags like “buy_now” and “shopify_checkout_url,” suggesting native shopping support.
- If confirmed, this would allow users to move from query to checkout in seconds—no affiliate links, just direct Shopify-powered transactions.
- OpenAI’s move mirrors Microsoft’s April launch of the Copilot Merchant Program, which embeds shopping directly into the AI experience.

Join Paul J Daly and Kyle Mountsier every morning for the Automotive State of the Union podcast as they connect the dots across car dealerships, retail trends, emerging tech like AI, and cultural shifts—bringing clarity, speed, and people-first insight to automotive leaders navigating a rapidly changing industry.
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