Volkswagen-backed Scout Motors broke ground on its new $2 billion electric vehicle plant in South Carolina last year. That factory is expected to roll out EV and EREV trucks and SUVs in the 2027-2028 timeframe. Scout also wants to skip the dealers and sell directly to you through an online portal. But that plan faces huge hurdles, starting in its home state of South Carolina itself.

Welcome to the Friday edition of Critical Materials, your daily round-up of EV news and events shaping up the world of electric cars. Also on our radar today: South Korean battery giants are in trouble as EV sales grow at a slower-than-expected pace worldwide. Plus, Tesla’s sales in China dropped sharply in January. Let’s begin. 

30%: Scout Wants To Change State Laws For Direct Sales

Photo by: Scout Motors

The Volkswagen Group revived the iconic Scout moniker (of the International Harvester Scout fame) last year. Scout plans to launch two EVs in the 2027-2028 timeframe: the Terra pickup truck and the Traveler SUV.

It wants to sell those EVs directly to you, circumventing the dealers, just like Tesla, Rivian and Lucid. But the direct-to-consumer sales model is set to face huge hurdles, as two dozen U.S. states ban automakers from selling vehicles to customers directly.

Now, Scout wants to change that practice nationwide, starting with its home state of South Carolina. Lawmakers presented a bill in the South Carolina General Assembly proposing an amendment allowing direct-to-consumer sales for automakers.

Here’s more from the Associated Press this morning:

Scout is determined to get the law changed to help them as well as other EV makers like Tesla and Rivian. They have gone on a media blitz that includes stories in local outlets. They are also trying to secure support in a Republican-dominated state with an argument that consumers should be free to buy whatever they wish directly, without a middleman.

Scout also is armed with a 2000 Attorney General’s Office opinion on the bill which would weeks later would become law and serve as the most recent major overhaul to South Carolina’s laws on new car buying.

“If a manufacturer cannot sell his own product, but must constitutionally pass that product through a ‘middle man,’ then our understanding of the free market system is way off base. The Internet is a worldwide web for trade, not a local instrument for protectionism,” wrote then-Republican state Attorney General Charlie Condon in the opinion, which is not binding and an educated guess on what a judge might do if someone sued over the law.

A study from data analytics firm CDK Global last year showed that traditional car dealers are not excited about selling EVs. They prioritize selling gas-powered cars that bring recurring service income, and so far have been easier to sell at a profit.

However, much of that hesitance also stems from the lack of understanding of the benefits of EVs and not educating the sales staff. It’s one of the reasons Tesla skipped the middlemen. It somehow managed to circumvent direct sales bans in conservative states through legal loopholes like leasing, processing purchases as out-of-state transactions and opening stores on tribal lands exempt from dealership mandates.

Scout is hoping for laws that would make direct sales easier. As the report above notes, if that doesn’t happen, its EVs could end up costing more. The Traveler and Terra EVs are expected to start at $60,000, which isn’t cheap. If that price increases over time, it could negatively impact sales.

Plus, Scout wants its sales experience to be highly digital, where owners can customize their EVs through an app.

While the EV ecosystem is capital-heavy and loss-making—barring Tesla and a few Chinese brands who have turned profits—it’s also worth noting that the EV transition is more than just focusing on profits.

It’s about moving towards sustainable transportation and cutting carbon emissions before the planet reaches a breaking point. Last year was the hottest since record-keeping began and last month was the hottest January ever.

At some point, the industry will have to move beyond the dealer-versus-carmaker feud and focus on what truly matters: accelerating EV adoption before time runs out.

60%: South Korean EV Giants Are Experiencing A Slump

South Korea is home to some of the world’s biggest electric vehicle companies.

Hyundai and Kia have emerged as behemoths in the EV space. The country is also home to some of the world’s leading battery makers, namely LG Energy Solution, SK On and Samsung SDI, which also has a strong stateside presence.

All of them are facing industry headwinds in some capacity. Business outlet Nikkei Asia reported on Friday that earnings of the three major South Korean battery makers plunged last year due to production cuts by American and European automakers.

SK On’s sales dropped 51% to 6.27 trillion won ($4.33 billion), LG Energy Solution was down 24% to 25.62 trillion won ($17.6 billion) and Samsung SDI’s sales fell 23% to 16.59 trillion won ($11.4 billion), according to Nikkei. Operating profits also fell for all three battery makers.

Demand slowdown in its home country and global regulatory uncertainties also prompted Hyundai to pause production of the Ioniq 5 and Kona Electric at its mothership in Ulsan, Korea, according to local news reports.

90%: Tesla Sales Fall Sharply In China, Is The U.S. Next?

Photo by: Tesla

The sales slump goes beyond just Korean automakers—who are actually doing super well here in the U.S. China is Tesla’s second biggest market globally behind the U.S., and things aren’t looking great there.

Sales of Tesla’s China-made EVs reached 63,238 units in January, an 11.5% drop over the same period last year, according to data from China Passenger Car Association as reported by Reuters. Month-over-month, deliveries of the Model 3 and Model Y declined by 32.6%.

Tesla sales have also dropped sharply in Europe recently and the revised Model Y now has a massive task at hand: revitalizing Tesla’s passenger car business. However, unlike the Korean companies, some of what’s hurting Tesla is self-inflicted.

Polls show that CEO Elon Musk’s antics are hurting the brand. The billionaire CEO, also leading the meme-inspired Department of Government Efficiency, is reportedly on an unchecked and aggressive crusade to undermine long-standing government agencies. 

100%: Do You Prefer Direct Sales Over The Dealership Model?

Scout Motors and Sony Honda Mobility are the latest to join the list of carmakers wanting to bypass the dealership model. They’re now facing a pushback from the National Automobile Dealers Association and will likely face legal challenges.

Haggle-free pricing and more transparency indeed favor the customers. But the dealers may have a bigger role to play in the transition to EVs than they think. Legacy automakers rely on their dealer network and they may want to tap into that established customer base to showcase their new, high-tech, software-defined electric offerings. Plus, dealers compete with each other. So if you don’t like the price at one, you can shop around. 

What’s your preferred car purchasing method? Through a dealer? Online? Or on Amazon?

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