Volkswagen’s Scout Motors reveals first EVs as it shifts to include plug-in hybrids

NASHVILLE, Tenn. — Volkswagen-backed Scout Motors revealed its first electric vehicles Thursday and announced plans for the brand to expand its lineup to include an emerging type of plug-in hybrid electric vehicle in addition to EV models.

Scout, a former American vehicle brand from 1961 to 1980, was expected to exclusively offer EVs in a bid for the German automaker to expand its presence in the U.S. However, slower-than-expected adoption of EVs and higher costs have led it to change course and include extended-range electric vehicles, or EREVs.

“Being a startup that moves quickly, we can pivot,” Scout CEO Scott Keogh, a longtime auto executive who previously led VW’s operations in the U.S., told CNBC. “The pivot that we made a number of months ago into offering range extender definitely was a smart play.”

EREVs are basically a type of plug-in hybrid electric vehicle. They include EV motors and battery cells, as well as a traditional internal combustion engine to power the vehicle’s electric components when the battery loses its energy. The engine essentially acts as a generator to power the EV components when needed.

Keogh said Scout added EREVs to better protect the brand from any market volatility amid less-than-expected consumer demand for EVs.

“We think electrification is the future. Range extender sets it up as an EV car, so it introduces people to electrification, yet it has a super smart, let’s say, ‘backup plan,'” he said during an interview Thursday. “It will drive like an EV.”

He said Scout has no plans to offer a traditional, non-electric vehicle with only an internal combustion engine.

The company’s first vehicles — a full-size pickup truck and large SUV — will cover about 40% of the highly profitable U.S. sales market.

Keogh said the company targets to be profitable on an operational basis within the first full calendar year after initial production of the vehicles, which will be built at a $2 billion plant that’s under construction in South Carolina.

“If you look at these profit pools, these two areas, from this size pickup truck to this sized SUV … these are the largest profit pools in the world,” Keogh said.

Being profitable during that timeframe would be quite a success, as current EV startups such as Rivian Automotive and Lucid Group lose tens of thousands of dollars on each vehicle they produce after several years.

Meanwhile, Keogh said an announced software deal between VW and Rivian will not impact Scout’s operations. He described the $5 billion software deal, which includes the establishment of a joint venture, as an “exciting opportunity” for Scout.

“It’s good for scaling. It’s good for technology. It’s good for everything,” Keogh said.

Scout’s South Carolina plant is planned to have a production capacity of 200,000 vehicles. Scout expects to use batteries — the most expensive part of an electric vehicle — from VW’s joint venture battery cell manufacturer in Canada.

The company opened reservations for the vehicles Thursday night on its website. Scout plans to sell the vehicles directly to consumers instead of through a traditional franchised dealer network like VW does in the U.S.

Scout said the vehicles will use the North American Charging Standard, an 800-volt architecture with up to 350-kilowatt charging capability, and will be capable of bi-directional charging that will allow the vehicle to act as a generator.

The SUV is expected to be a competitor to traditional off-road SUVs from Jeep as well as the Ford Bronco and Toyota Land Cruiser. It’s larger than Jeep’s well-known Wrangler, which is currently available as a plug-in hybrid electric vehicle.

The truck is a full-size pickup — a segment currently dominated by Ford, General Motors and Stellantis’ Ram brand. But the electric pickup market where Scout will compete remains a developing market.

Automakers such as GM and Ford rushed to release all-electric pickup trucks early in this decade to compete against several EV startups, many of which never materialized, as well as Tesla. Stellantis is expected to release all-electric and EREV full-size pickups by next year.

But after rushing the vehicles to market, sales slowed. Much like the overall EV industry, the large vehicles went from commanding significant price premiums to being highly incentivized.

Overall, this electric “truck” market, including the SUVs, accounted for nearly 58,000 vehicles sold during the first half of this year, according to estimates from Motor Intelligence. That’s less than 1% of the roughly 7.9 million light-duty new vehicles sold during that time in the U.S., but a 35% quarterly increase from the first to the second quarter, according to the data.

Keogh believes Scout can differentiate itself in the market with its products, lower pricing and brand appeal. Additional Scout products are expected to follow in the years ahead, Keogh said.

“Can we consider some point in the future sizing down? Absolutely,” he said. “You want to throw the dart at the best place first. And I think we’ve done that between these two vehicles.”