By on November 12, 2018

Care by Volvo subscription service

Despite the push from an eager industry, car subscription services haven’t proven an overwhelming success. The general consensus is that premium services, while intriguing concepts, are too expensive and complicated to maintain at scale. Book by Cadillac, which was recently suspended by General Motors, is emblematic of the public’s lackadaisical response to a system mired in logistical issues.

However, the concept itself isn’t dead just because one manufacturer decided it wasn’t worthwhile. Other premium nameplates still have their own services — Toyota plans to launch its own subscription-based pilot program in Japan soon, while Volvo Cars has enjoyed some success with Care by Volvo. Still, framing it as a trouble-free victory for the brand would be a mistake. Volvo’s subscription service has been as much a learning opportunity as it has been an overwhelming triumph. 

“Growth is fun, but it can also complicate things,” Anders Gustafsson, CEO of Volvo Cars of North America, told Automotive News last week.

Launched one year ago on the company’s new XC40 crossover, Care by Volvo allows customers to subscribe to a service that bundles payments, insurance, and maintenance costs into a single payment between $650 and $850 per month — depending on trim. Thus far, the XC40 is the only vehicle tied to the service, but the company intends to add the S60 and possibly another model soon, which is important, as Care forces users into two-year agreements that allow subscribers to swap into new vehicle after 12 months.

Of course, the wait is likely to be longer than that for new customers. Things have been complicated. Care by Volvo was bashed early on for its inability to serve customers in a timely matter. Unfortunately, that doesn’t appear to have changed much in the last year. Within its first four months of operation, Volvo claimed to have sold the number of subscriptions it had anticipated over a full year of operation. Still behind, the automaker claims signing up for a subscription on the XC40 now puts you on a waitlist that extends into 2019.

In addition to wondering what type of person pays $850 per month to borrow a car they could have leased for hundreds less, we wonder how Volvo intends to handle trades once the S60 arrives. Presumably, they’ll be subject to the same issues as the XC40 and likely incur more delays and logistical problems.

Gustafsson said Care by Volvo claimed as much as 15 percent of the XC40s intended for dealerships. Volvo eventually instituted a 10 percent cap on the XC40 while the CEO travelled between dealerships to help convince them they each had a place in the automaker’s plan to create revenue streams beyond traditional car sales.

“It’s really the same concerns from everybody, and it’s just that they don’t feel secure,” Gustafsson said. “They’re afraid we’re going to take something away from them … I would say the biggest question mark around subscriptions is that consumers need to decide that. Our retailers are asking, ‘Please let us be involved, because we can help.'”

Volvo’s current plan involves having dealerships find the quickest way to get returned (used) vehicles back into the subscription lineup or prep models for resale. Meanwhile, the carmaker intends to refine the Care by Volvo app, providing a second-generation version to further minimize the need for customers to interact with the dealership.

The big takeaway is that these types of services can work for an automaker if the circumstances are right and set a precedent for a new business model. Volvo’s complete lack of choice between vehicles — supposedly the main appeal of these services (and hardest aspect for automakers to adapt to) — proves that a certain subset of customers are willing to pay more for something that basically just takes care of their insurance provider. This has to be of interest to industry bean counters.

[Image: Volvo Cars]

Get the latest TTAC e-Newsletter!

13 Comments on “365 Days Later: What Volvo’s Subscription Service Means for the Larger Industry...”

  • avatar

    I wonder who participates in this plan. If it isn’t a true monthly rental, but more like an all-inclusive two-year lease, then what do you get in exchange for paying more? Not more flexibility, so…what? Unless your issue is that you’re so young or so reckless that your insurance costs more than a new-car lease payment each month, I don’t see an upside. Someone clear it up for me?

    • 0 avatar

      These plans just don’t work as has been proven. The reason they’re so expensive is that the automaker knows there will be trends. Nobody will want a convertible or sports car in the winter for example. They have to figure out how to work in leases for multiple cars. That’s why it’s so expensive. They know some models will sit for periods of the year. These services will never work well. There’s just too much crazy thinking in everyone’s quest to be a mobility company.

  • avatar

    “In addition to wondering what type of person pays $850 per month to borrow a car they could have leased for hundreds less,”

    Well, the lease isn’t going to include insurance and maintenance (although the latter would probably be pretty low on a new car). The one situation where it might make sense is once the swap becomes available – if you think you might need a different vehicle in the near future – you want a sedan now but to be able to get an SUV when you have kids.

  • avatar

    Everyone seems to be tiptoeing around the fact that cars are just too expensive for what you get. Replacing your fullsize V8 RWD car every 70k miles is no longer an expected task, while some may rejoice this, it also causes people to be less likely to give a different brand a chance. Why risk buying a unknown brand if your paying 60k? Clearly there are trade offs like better efficiency, safety, and performance. But there are clearly a market for affordable vehicles that aren’t also penalty boxes. Seemingly every new vehicle today is “upmarket” tiny, and extremely cheaply built (read unibody, FWD, 4 cylinder engines). Build something interesting, cheap (but profitable), and not the size of a clown car.

    Maybe you wouldn’t need schemes like rideshare, mobility, or subscription if manufacturers could build an interesting car at a compelling price.

    • 0 avatar

      @hummer A thousand times this!!!! The cost of a new vehicle, any new vehicle has vastly outstripped the average person’s ability to buy them. Pretty much the only people buying new cars are the upper 5% of the population. Everyone else buys used, and the less privileged you are the older your stuck buying.

      • 0 avatar

        “Pretty much the only people buying new cars are the upper 5% of the population. Everyone else buys used, and the less privileged you are the older your stuck buying.”

        The only time this wasn’t the case was when cars were complete crap that only lasted 3-4 years. A 5 year old car today is a lower risk than a brand new car even 20 years ago.

      • 0 avatar

        If only 5% purchased new there wouldn’t be the level of production there is at the moment. Top 20% starts at 91K, this is the target market for today’s hyper expensive shatboxes. Five or maybe ten percent would be the target market for Volvo’s ate fity dollas a month scheme.

  • avatar

    So I did some digging and some number cruntching… and I don’t know how Volvo thought this would be a good business case…

    They say they capped at 10%… and they have been selling ~1k 2018 XC40’s a month… so lets assume that is the low end of the sign ups since they met that cap in 4 months.

    I assumed they signed up 1800 sub’s this year @ ~$750/mo per sub…

    well over 2 years that revenue is eqv to 852 2018 XC40 priced GENEROUSLY at $38k sold. Then I assumed they resaled…

    so how much is off lease 2 year old car that one assumes was beaten like a mule rented with your dad’s money… I guessed $24k avg. could be a little higher but I don’t think so if the buy in starts at $33k.

    so selling 3600 rented mules for $24k is eqv to selling a little less than 2280 brand new mules @ $38k (again I’m trying to stay on the generous side of this est)…

    long story short assumedly they may move 3600 hunks of iron for the profitability of 3100 hunks of iron… a 14% loss.

  • avatar

    The math still seems off on this. A zero down lease would be about 350-4 on the sky high msrps. So avg good driver spends 100 or less a month on insurance, its still not 650-850. Why not price it fifty bucks over a zero down lease and offer a sliding scale for insurance (just hit fico)? People in the five hundred dollar payment bracket will crunch numbers Volvo, why should I give you more for the privilege of what, getting a different model? Cadillac at least offered different model/driveline types, all of your models are exactly the same.

  • avatar

    What an interesting practice

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • schmitt trigger: I am happy, seriously, that the comments have not devolved into a blue state vs red state political...
  • kcflyer: Deer Hunters rejoice!
  • redapple: BS. BEV ORV? Just wait until it runs out of juice in an area where the rescue pickup cannot access. Fixing...
  • Dave M.: My first opportunity driving a Japanese brand was the new 1974 Corona wagon I used in a high school job...
  • kcflyer: Great Movie, R.I.P. Mr Farley

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber