A trade group representing California car and truck dealerships has filed a petition with the state’s New Motor Vehicle Board to stop Volvo from offering cars on a subscription model. The filing, first reported by Teslarati, is an escalation of the dealer group’s effort to disrupt Volvo’s subscription program, which became public late last year after it sent a letter to the CEO of the Swedish automaker’s North American division.
The subscription service, dubbed “Care by Volvo,” was announced in the second half of 2017. Customers “subscribe” to a car for two years, and make fixed monthly payments of around $750 (prices vary depending on the model). That price covers a bit more than a typical lease — insurance and maintenance are included, and there’s no down payment — and customers can also trade in a car for a new one after 12 months, which is similar to how Apple runs its iPhone upgrade program. Customers still take delivery at Volvo dealerships, though, and have to have their vehicles serviced at one as well.
The group pushing to stop Care by Volvo is the California New Car Dealers Association (CNCDA), which represents more than 1,000 franchised car and truck dealers across the state, according to the filing. The CNCDA calls Care by Volvo a “clever, but illegal, marketing ploy.” Care by Volvo, the group says, is little more than “an ‘all-inclusive’ two-year lease with a fixed, standardized, pre-determined monthly fee” that “includes the cost of the vehicle, insurance, maintenance, road hazard protection and normal wear-and-tear.” The group also points to how Volvo itself uses the term “lease” in both internal documents about Care by Volvo, and in ones provided to customers, which are included as exhibits to the petition.
By offering all these services that are typically included in a traditional lease, the CNCDA says that Volvo “usurps the traditional sales role of Volvo dealer franchisees.” This violates state laws that prohibit competition between manufacturers and dealers, the group argues, because the franchisees are trying to sell or lease the same vehicles that Volvo is offering subscriptions for. It also violates the franchise agreements Volvo has with dealers, they say.
“[Care by Volvo] is not a mere alternative to traditional means of acquiring a car; [Care by Volvo] is a direct competitor to the Volvo dealer,” lawyers for the CNCDA write in the petition.
The push to stop Volvo’s subscription service from taking off is the latest sign of growing tension between dealers and automakers stemming from the latter’s attempt at finding new business models. While total car sales remain strong overall, the recent growth trend tapered off in 2018. Meanwhile, companies like Tesla have put pressure on traditional automakers to try out new ideas like subscriptions, or even direct sales. In fact, Tesla has spent the last few years wrestling with dealer associations across the country, and is still not allowed to sell directly to consumers in some states.
Volvo’s far from the only dealer trying out a subscription model. Mercedes-Benz, BMW, Audi, Jaguar, and Porsche all have slightly different versions of the idea. General Motors trialed one with Cadillac, too, but decided in November to put it on hold. Each automaker has seen varying degrees of success, and they’re also piloting them in different locations, at different pricing tiers, and with different volumes. Volvo has found success, to the point that it ran low on supply of the XC40, its new compact SUV, at the end of 2018. (Though it got off to a really messy start.)
The CNCDA’s petition has not been heard by the New Motor Vehicle Board’s members, executive director Timothy M. Corcoran told The Verge in an email. “That will happen at a publicly noticed meeting,” he wrote. According to the NMVB’s website, the petition will have to be reviewed by the board’s legal staff, before being addressed at the next regularly scheduled board meeting. Representatives for Volvo and the CNCDA did not immediately return requests for comment.
– The Verge