VW is in Big Financial Trouble! Should It Sell Scout Motors?

German automaker Volkswagen is in a terrible financial spot that has it considering drastic action on less or non-profitable areas of the company, which could include its investment in EV startup Scout Motors.

What is Happening at Volkswagen?

They say when it rains, it pours. A couple of weeks ago, I did a story about a potential strike at the Volkswagen Chattanooga plant. Today I am digging into the brand’s current financial woes.

The automaker, which is in the top three in overall production globally, has been facing mounting financial pressures from declining profit margins, cash flow that is lower than expected, and a debt load that could prove insurmountable. Thomas Schaefer, CEO of Volkswagen, claims the brand is “no longer competitive” and warns of big changes internally.

VW finds itself with a Q3 operating loss of $1.5 billion versus a $3.2 billion operating profit this time last year. Internal claims cite tariffs and a refocusing of Porsche’s strategic plans. With this massive swing in funds, VW plans to close factories, shift corporate product planning further, and reduce staff in a drastic cost-cutting plan to return to profitability.

How Will VW Fix This?

Gunnar Kilian, a VW board member, warns that the company’s goal to cut about $11.6 million will need to be achieved through measures other than just workforce reduction. “We need to finally be brave and honest enough to throw things overboard that are being duplicated within the company or are simply ballast we don’t need for good results,” Kilian said.

That “ballast” has me thinking, what recent and massive investment has VW made in the last five years that is yet to return any profits?

Scout Motors

Scout Motors is officially a wholly owned subsidiary of the Volkswagen Group. Specifically, Scout Motors, Inc. is a U.S. corporation established under Volkswagen Finance Luxembourg. According to the financial reporting from 2023, “an amount of $493 million was contributed to the company in fiscal year 2023. The company has been included in the Volkswagen consolidated financial statements since January 1, 2023.”

Despite being in the corporate family with all the other VW brands, Scout has operated as its own independent company with its own executive team and board. Scott Keogh, previously President and CEO of Volkswagen Group of America, became the first CEO of Scout Motors.

The brand has moved its corporate headquarters to Charlotte, North Carolina, and is completing its production facility in Blythewood, South Carolina. Company officials still claim that the brand is on target to begin full production of its Terra pickup truck and Traveler SUV in 2027.

Scout’s EV Future

The original Scout was produced from the 1960s until the 1980s as both a pickup and SUV, so it was only natural that those be the vehicle types of this new Scout Motors brand. What is different from those initial Scout vehicles is the powertrain. Scout is coming to market with a dual powertrain strategy that consists of a full EV and a range-extended EV that uses a 4-cylinder VW engine as an onboard generator to help reduce range anxiety. We are seeing brands like Ram working to bring this technology to market in its Ram REV.

With the cooling of American appetites for EVs this hybrid strategy could be the key to the brand making it here long term. All reports from brand officials claim that over 80% of reservation holders have opted for the REEV model, myself included. 

Could VW Sell Scout?

Volkswagen is in a tough spot, needing to shed a lot of expense and debt in a short amount of time. Scout is nearly finished with its South Carolina production facility, and the corporate offices are filling up with top talent; it is highly unlikely the brand will just disappear into Chapter 11 oblivion.

With nearly half a billion dollars already invested in the brand, Scout provides VW with a potential financial turnaround if it were to sell the brand, if it could find the right buyer. There is certainly customer demand for the product, with over 130,000 refundable $100 deposits placed. The design stays true to the rugged original with a modern twist that fits the winning formula for the current Ford Bronco.

Time will tell how well the product is received in the market when the product finally gets into customers’ garages in a little over a year, but Scout shows no sign of slowing down its marketing efforts as it tries to reach its target audience with its outdoor booth at the 2025 Los Angeles Auto Show.

We have reached out to both Scout Motors and Volkswagen AG for comment, and will update this story as necessary.