California Auto Dealers Ask Volvo to End Subscription Service

Matt Posky
by Matt Posky
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california auto dealers ask volvo to end subscription service

The California New Car Dealers Association is requesting that Volvo immediately end its Care by Volvo subscription service within the state. According to the group, the automaker is in violation of California’s franchise and consumer protection laws.

It’s been a long time coming, as Care by Volvo is clearly designed to minimize dealer interactions. Anders Gustafsson, CEO of Volvo Cars of North America, even said the program claimed as much as 15 percent of the XC40 crossovers intended for dealerships this year.

“It’s really the same concerns from everybody, and it’s just that they don’t feel secure,” Gustafsson of said dealers last month. “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.'”

It looks like they’re tired of begging.

According to Automotive News, Mr. Gustafsson received a letter on November 30th from Brian Maas, president of the California association, who accused Volvo of “directly competing” with its dealerships. It also alleges that Volvo illegally modified its franchise agreements and that the variability of pricing vehicles through Care by Volvo may “constitute illegal payment packing.”

Care by Volvo, which launched late in 2017 for only the XC40, is a two-year subscription service via a proprietary app. Access to the vehicle, insurance, and maintenance is included in one monthly payment that ranges from $650 to $850, depending on the chosen vehicle. Subscribers become eligible to swap to a different vehicle after 12 months. While we’ve complained about the ludicrous premium you pay for such services, Volvo’s is actually on the more modest end of the spectrum in terms of overall expense.

“Care by Volvo has proven popular with consumers and has attracted new customers to the Volvo brand,” the company responded in a statement. “Volvo Car USA has always had an open and honest dialogue with its retail partners about Care by Volvo and has recently completed a 12-month anniversary review of the program. An updated version of Care by Volvo (2.0) was recently reviewed with the Volvo Retailer Advisory Board and the feedback was positive and in favor of the changes.”

Maas confirmed that the California New Car Dealers Association has met with Gustafsson and exchanged several letters with Volvo about the program and dealer concerns. However, he also said the automaker unsatisfactorily answered the association’s legal questions.

According to his letter, the dealer group sees the subscription service as a lease where the monthly fee is set, regardless of the actual cost to provide insurance to a customer. Maas said it was unfair to charge a low-risk motorist the same as a customer who is more costly to insure.

“For such a customer, Volvo manipulates the cost of the vehicle to ensure that customer’s monthly payment equals the amount promised by the [Care by Volvo] program,” Maas wrote. “California law expressly prohibits dealers from ‘packing’ the cost of insurance into the monthly lease payment. As such, [Care] exposes Volvo dealers to liability under this (and other) consumer protection statutes.”

Sign-up for Care by Volvo happens online or through the Volvo app and a Volvo concierge coordinates with a local dealer for vehicle delivery. Dealers receive a payment for each Volvo subscription they handle, Maas said.

“In light of the understandable concerns of our Volvo dealer members, we ask that you immediately suspend the [Care by Volvo] program in California and work with your dealer partners to design a subscription program that strengthens your relationship with dealers and complies with California law,” Maas wrote in the letter.

Essentially, stores want Volvo to redesign the program to work more closely with dealers. These kinds of subscription models essentially squash the ability for dealer markups while allowing factories to make some side cash via a more direct relationship with the customer. That results in dealerships becoming little more than pickup and drop-off points for subscription vehicles.

[Image: Volvo Cars]

Matt Posky
Matt Posky

Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.

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2 of 16 comments
  • Frantz Frantz on Dec 06, 2018

    The subscription program would work better if you could walk onto a lot and pick a car and get a price based on that car. The Care by Volvo requires you to enter into a wait list for the XC40 they don't have enough of. You wait a year sometimes to get a car to keep for a year. Even under it's ideal setup you order and wait a few months. That's counter to the appeal of subscriptions. That just doesn't make sense. Plus you're limited on options. To make the program successful they could have you pick a car from inventory and get a subscription on that base on msrp. It wouldn't always be the same. I think most customers do want the dealership interaction, though they may wish it were a different interaction than they get.

  • HotPotato HotPotato on Dec 08, 2018

    Does this mean Hyundai's flat-rate package lease on an Ioniq Electric is illegal too? Intersection dept: wasn't Volvo supposed to bring us an electric XC40 for $40k-ish? If they're leasing the regular gas version for $650 a month, then either the gas version is hella profitable, or the promised electric version isn't going to come in anywhere near its promised price.

  • Lorenzo A union in itself doesn't mean failure, collective bargaining would mean failure.
  • Ajla Why did pedestrian fatalities hit their nadir in 2009 and overall road fatalities hit their lowest since 1949 in 2011? Sedans were more popular back then but a lot of 300hp trucks and SUVs were on the road starting around 2000. And the sedans weren't getting smaller and slower either. The correlation between the the size and power of the fleet with more road deaths seems to be a more recent occurrence.
  • Jeff_M It's either a three on the tree OR it's an automatic. It ain't both.
  • Lorenzo I'm all in favor of using software and automation to BUILD cars, but keep that junk off my instrument panel, especially the software enabled interactive junk. Just give me the knobs and switches so I can control the vehicle, with no interconnectivity of any kind.
  • MaintenanceCosts Modern cars detach people from their speed too much. The combination of tall ride height, super-effective sound insulation, massive power, and electronic aids makes people quite unaware of just how much kinetic energy is nominally under their control while they watch a movie on their phone with one hand and eat a Quarter Pounder with the other. I think that is the primary reason we are seeing an uptick in speed-related fatalities, especially among people NOT in cars.With that said, I don't think Americans have proven responsible enough to have unlimited speed in cars. Although I'd hate it, I still would support limiters that kick in at 10 over in the city and 20 over on the freeway, because I think they would save more than enough lives to be worth the pain.