Volvo's Subscription Service May Breach California's Franchise Law
It’s no secret that Volvo dealers aren’t keen on the factory subscription plan. Last December, the California New Car Dealers Association even asked the manufacturer to end Care By Volvo on the grounds that it was taking business away from storefronts. The automaker responded by saying the service had proven popular with consumers, attracting new customers to the brand while reassuring dealers that version 2.0 of the subscription plan had been approved by the Volvo Retailer Advisory Board and would give shops more to do.
Rather than take the wait-and-see approach, the California New Car Dealers Association petitioned the state’s New Motor Vehicle Board. Last week, the group unanimously voted to direct the state’s DMV to investigate Care by Volvo and four claims that the service violates provisions of the California vehicle code — potentially leading to disciplinary actions.
According to Automotive News, dealers began petitioning in January with a public hearing manifesting last week.
“This is just the first step in ensuring that manufacturers, specifically Volvo, stop going around their franchisee business partners in an attempt to retail vehicles directly. Franchise laws exist to protect dealers from this type of behavior,” Brian Maas, president of the dealers association, said in a statement. “Our dealer members support innovation, including subscription-based models, but we are against violating the law. There is a right way and a wrong way to do business in California, Care by Volvo is the wrong way.”
Care by Volvo launched in 2017 as a two-year subscription service. As with most subscription plans, use of a vehicle, insurance, and maintenance are all packaged into one monthly payment. After a 12-month stint, subscribers can swap for a different vehicle. Originally, that meant Volvo customers could get an XC40 for between $650 and $850 per month (depending on trim). But the service has expanded to other models since then.
“Volvo Car USA is committed to developing Care by Volvo in collaboration with our retailers to offer the flexibility of subscription side-by-side with traditional lease and financing,” a Volvo Car spokesperson said in response to the investigation. “We continue to improve the program, which will soon enable retailers to complete subscription purchases and provide instant vehicle delivery. Volvo Car USA believes the addition of a subscription option on the sales floor will benefit both customers and retailers.”
The New Motor Vehicle Board wants the DMV to provide it with a report on the results of the probe within the next 180 days.
[Image: Volvo Cars]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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Highdesertcat- The question that begs to be asked here is 1) Why would he want to put a 20ish grand (vehicle) at risk by not having full coverage? 2) Does he have ZERO other assets-because anyone with any assets at all knows the state minimum are sub standard for anyone with a house, pension, IRA or anything that could be attached in an at fault accident. I can only assume he is one of those guys who thinks he will NEVER get in an accident.
Highdesertcat- For reasons I won't go in to- I have a half-million dollars coverage on my auto policies. After that coverage my 1 Million dollar umbrella kicks in. No one plans to be financially ruined-or have a lien on their assets-but one could be putting those to the test at some point with your ideology.