By on March 8, 2021

volvo emblem logo grille

Last week, we discussed Volvo Cars’ plan to transition to an online sales model as a larger quotient of its product becomes electrically driven. As luck would have it, the concept hasn’t been a runaway success with auto retailers. Vehicles becoming increasingly digitized, combined with the unparalleled consumer access offered by the internet, has made numerous manufacturers wonder why the dealership role couldn’t be diminished. After all, Tesla has done alright without a traditional sales network.

But Tesla didn’t have a gross of existing showrooms ready to make a fuss. Volvo has nearly 300 and dealerships are reportedly voicing their concerns as the manufacturer does what it can to assuage fears about the possibility of their being put out of businesses in the coming years.

It’s not new ground; showrooms have been expressing concerns since Volvo introduced its subscription program in 2017. Numerous dealers alleged that the automaker had violated state franchise laws by placing themselves into direct competition with their own dealer network. But Volvo tweaked the program so it would remain within the legal framework of most U.S. states.

This time around, the stakes seem a little higher. Volvo shops are not complaining about losing relevance in 2030 — the final year of the company’s planned conversion to an all-electric brand. They’re contemplating a world where they’ve been scaled down into little more than delivery hubs for customers that did their dealings with the factory online.

“Dealers always want to control the consumer experience from start to finish,” said Volvo Retail Advisory Board Chairman Ernie Norcross explained in an interview with Automotive News. “If we don’t control the buying experience, how are we anything but a delivery and service center?”

Norcross, who also owns a showroom in Memphis, TN, added that franchisees have come to him in a state of dismay over what the future holds for their business. It’s becoming a familiar tune as increasingly more automakers toy with the idea of pushing online sales, often starting with EVs. There’s a clear worry among dealerships that they’re gradually being forced out of the industry while manufacturers move in on their territory.

“Will the margin compensation for [battery electric vehicles sold online] be the same?” Norcross mused. “We are currently having that conversation.”

Volvo CEO Håkan Samuelsson has already signaled that it’s to be full steam ahead, however. Going electric and swapping to digital sales are now essential aspects of the brand’s long-term strategy.

“I am totally convinced there will be no customers who really want to stay with a petrol engine,” he explained to the press last week. “We are convinced that an electric car is more attractive for customers.”

Though he suggested that dealers will still play an important role in informing customers about the car, even if they won’t need to know as much about financing or how to write up a lease agreement (as that will be done by the factory via the internet). Meanwhile, Volvo Cars USA CEO Anders Gustafsson has been trying to convince salespeople that their jobs will remain intact as he frames everything as an exploratory initiative to test the viability of the online retail program.

“We have been very clear with that,” he said. “We will, of course, push things a little bit and see if we can develop this industry, especially related to digitalization.”

Ultimately, we’re inclined to buy into the premise that this is a trial run to see if the digital model works. But a successful test would seem to indicate a sort of lingering death for the traditional dealership. At the very least, staffing requirements will be scaled back immensely as more people do their business over the internet. The logical conclusion to this program brings us back to those concerns shared with Mr. Norcross, where dealerships just end up as corporately sanctioned service centers.

[Image: Volvo Cars]

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43 Comments on “Report: Volvo Dealers Respond Negatively to Digital Retail Strategy...”


  • avatar
    Steve Biro

    “I am totally convinced there will be no customers who really want to stay with a petrol engine,” he explained to the press last week. “We are convinced that an electric car is more attractive for customers.”

    Maybe in your European bubble, Hakan. But that’s not necessarily the case elsewhere. It’s going to take big, big strides in development of batteries and infrastructure to make it the case anywhere but in urban centers.

    • 0 avatar
      SCE to AUX

      Tesla is doing it today, VW is going all electric, GM claims to be targeting such a future, and Ford is dabbling with a truck, not to mention several startups who will be offering a variety of long-range sedans, delivery vehicles, and trucks.

      Regulators aren’t backing away from the electric future, either.

      Volvo doesn’t need to sell pickups to Texas farmers who drive 500 miles a day. But they already have a decent start on building an attractive vehicle for everyday use or longer drives with the established CCS network, which is improving daily.

      Volvo is just reading the tea leaves. Besides, they don’t want to end up like Jaguar – a small brand that will go extinct before 2030.

      • 0 avatar
        dal20402

        To expand on this: Volvo’s North American target market is affluent people who live in cities. So long as the range is long enough (or the charging easy enough) to get to the vacation house and back, electric will have no drawbacks to this audience.

        TTAC is always deeply convinced that the median auto buyer is someone who lives in a rural area and takes 1000-mile road trips every weekend. It’s just not so.

      • 0 avatar
        Add Lightness

        Jaguar will not go extinct, it will just have a long, long hibernation like Bugatti and Maybach did.

      • 0 avatar
        talber8h39

        Jaguar may not go extinct before 2030 if they partner up with Toyota; I could see benefits from them platform sharing, maybe a new sedan spun off the TNGA GA-C and GA-K platforms?

        A Jaguar based off the Camry platform, couldn’t be that bad, GM did this in the Nineties, so probably wouldn’t be much worse??

        Jaguar could also rebadge the Lexus LC as its own model; yes, it’s badge-engineering, but a Toyota/Jaguar wouldn’t be all bad?

  • avatar
    Fred

    This has been discussed for a few years now. If I owned a dealership and I could sell it, I might just take them up on the offer. Just seems it’s a matter of time.

  • avatar
    dwford

    Seeing how way too many people can’t even pair the bluetooth in their cars, even after more than a decade of bluetooth in cars, I’d say the need for in person training on a complicated piece of rolling electronics is more necessary now than ever. The “they’ll figure it out” model sort of works for cellphones, but less so for vehicles, especially those with new types of drivetrains and interior controls.

    • 0 avatar
      Rick T.

      I continue, as an old fogey, to be shocked at how many young people are talking from the phone when they drive. Not sure if that’s just the preferred method, can’t be bothered, or can’t do it.

    • 0 avatar
      JMII

      But how many dealers actually teach you about the vehicle? Pretty much none in my experience. Thanks to the internet I know more about the car then they do. This includes the one Volvo I did buy (not doing that again).

      The dealership sales model is broken. I don’t need a sales person other then to grant me access to the vehicle in question and maybe for them to point out the differences in models, trims or options.

      “control the buying experience” Sure… translation = don’t let a potential customer leave without getting that 4-square filled out.

      • 0 avatar
        dwford

        In my experience selling cars, once the customer is done signing the paperwork, they are very antsy to get out of there. They have little tolerance to sit through an overview of their new vehicle.

        • 0 avatar
          Art Vandelay

          Maybe do the overview during some of the time you are waiting for whatever it is that takes so long

          The last one I got though I figured out that if you are just sitting “waiting for the manager” or whatever if you give them the “you know, if it’s going to be a bit I’m going to run and get something to eat” they will hurry things along.

          The Honda dealership is the only experience I had where the salesperson showed me anything useful about the car. He knew the product. He actually set up the radio presets (we could have, but it was a nice touch) and showed my wife how all the Honda Sense stuff worked and could be adjusted.

          When I got the Challenger I was showing him stuff and I drove my Fiesta ST into the wash bay because neither the salesman nor the detailer on shift could drive a stick. Yay Dealers!

          • 0 avatar
            talber8h39

            A few years ago on social media Tiera Skovbye was actually saying how GOOD the car dealer experience was in the Greater Toronto area!

  • avatar
    ajla

    I’ve read many “insider” things over the years saying that direct sales would not be a net positive to the consumer but I’m still not convinced.

    I’ll pull this story up though next time someone tells me dealers don’t make money selling new cars. They are obviously are not content with just being authorized service centers and selling used vehicles.

    • 0 avatar
      dwford

      Direct sales would mean a lack of price competition within the brand, and therefore higher prices. The dealer’s profit margin, which is often discounted to the consumer, would accrue to the manufacturer. Yes we would still have price competition between brands, but we have that now, and we still expect an additional discount from the dealer.

      • 0 avatar
        Kendahl

        No more pitting dealers against each other with the lowest cost source making the sale.

      • 0 avatar
        ajla

        How much is the actual *dealer discount* on a new car sale? And how many people need to get hit with a higher price for the good negotiators to get their deal? On a macro level are dealers really keeping prices down?

        Also, we were talking on the Sorento review a few days ago about how dealers only want to stock silver or gray high trim crossovers. I don’t understand why those same dealers would protest someone being able to buy a Veloster N or T8 Polestar or base Compass direct from the manufacturer when they aren’t interested in selling that stuff in the first place.

        • 0 avatar
          28-Cars-Later

          They will offer you “invoice” or some small amount over (or under) when they want to move metal – that’s your “discount”. They still get holdback, unless somehow you get them to give up part/all of holdback.

      • 0 avatar
        SCE to AUX

        “therefore higher prices”

        Not so. That’s a mfr problem, not a dealer problem.

        If I discover that every Volvo outlet shows the same price for the same vehicle, and it’s too high, then I’ll shop for a different brand.

        Tesla’s prices are the same nationwide. One of the many reasons I didn’t buy one is the price, but it’s comforting to know that I don’t have to think about finding a better deal at some obscure dealer.

    • 0 avatar
      ect

      The last time I looked, NADA’s website featured a claim that auto dealers, on average, get an ROE in the range of 33-34%. Which is an extraordinary return, typically at least twice what OEMs earn.

      To dwford’s point, I can observe that a friend of mine who retired from Toyota a few years ago has complained to me that part of Toyota’s experience with dealers was that they were happy to compete against other brands, but loath to compete against other Toyota dealers.

  • avatar
    SCE to AUX

    “If we don’t control the buying experience, how are we anything but a delivery and service center?”

    Cry me a river of tears.

    Figures for 2019 in the US:
    Total car sales = 57.9 million
    New car sales = 17.1 million (30%)
    Used car sales = 40.8 million (70%)
    Total US fleet = 276 million

    After that new car sale, the dealer instantly competes with every other service center for everything but warranty work. They need to find a way to be competitive on the back end of the sale, because the front is a-changin’.

    People want online financing, at-home test drives and delivery, and hassle-free pricing. Oh wait, several outlets already offer that. These dealers are trying to resist a tsunami of change.

  • avatar
    Garrett

    While I’m not a huge fan of dealers, this is somewhat of a boneheaded move.

    Trading your car in is often a huge part of buying a new car. I get it, you totally sell your car private party all the time, because you’re awesome. Stop typing. Some of us don’t want to deal with randos who are trying to rip us off or will waste our time. The amount I “lose” on trade in is me paying the dealer to take ALL the risk – and sometimes it works out, as I observed once when my trade was still sitting in the same spot when I returned for my first oil change with freakin’ cobwebs on it.

    The next thing is that with dealers, you do have the potential for some give and take. This will NOT work when you go straight to the manufacturer, because there’s no reason for them to give YOU a good deal, or a better deal than someone else.

    For example, I can buy an instrument directly from Fender, or I can buy it from a music shop. I’ll buy it from the music shop every day of the week, because I can sometimes get them to work with me on price or other terms. Sometimes I even get a free bag of candy.

    Volvo has managed to create some great vehicles at present, but their CEO seems a bit out of touch with the larger world, and that does worry me.

    • 0 avatar
      ajla

      “Some of us don’t want to deal with randos who are trying to rip us off or will waste our time.”
      “because there’s no reason for them to give YOU a good deal, or a better deal than someone else.”

      No one is saying that there should be *mandated* direct sale, but is there any reason why direct sale should be illegal if the manufacturer wants to do it? As you pointed out several consumer products are already available both direct and through retailers and the world doesn’t end.

      If the dealer sales model works best for you then by all means keep going there but why should the entire market be constricted to it?

      • 0 avatar
        Garrett

        No reason for it to be illegal but have you noticed how many places sell Macs? Not a ton. And Apple goes out of its way to make sure that it’s not really worth buying from other sources unless Apple itself is low on inventory.

        Dealers are far more likely to serve areas that might not be “worthy” of direct manufacturer investment.

        Having channel competition helps nobody.

        • 0 avatar
          ajla

          “Having channel competition helps nobody.”

          Dealers having a complete monopoly over production inventory isn’t good either.

          • 0 avatar
            jack4x

            I’m not at all convinced that manufacturers have any real interest in direct sales.

            The upside is a potential for modest profits on each unit, the downsides are many.

            Automakers don’t want to carry vast inventory on their books, and customers don’t want to wait weeks for a factory order to be built. It is also insanely expensive in dollars and labor relations to shut down and restart factories and suppliers. That means someone has to carry the inventory that allows the automakers to run production at a steady rate regardless of short-term market fluctuations. That someone is the dealer network.

            If the automakers really wanted direct sales, they could crush the dealer lobby like a fly. The fact that they haven’t, plus my experience in manufacturing, tells me they have no interest.

    • 0 avatar
      SCE to AUX

      “This will NOT work when you go straight to the manufacturer, because there’s no reason for them to give YOU a good deal, or a better deal than someone else.”

      Then guess what, that mfr will lose business. What good will it do for Volvo (in this example) to suddenly raise their prices 15%? They’ll learn pretty quickly that their customers went elsewhere. I can easily shop for a competitive product from Lincoln, Audi, Mercedes, BMW, Genesis, Lexus, and so on.

      Your concerns only have merit if somebody is forcing you to buy the product.

      Besides, today people already initially shop based upon MSRP, expecting very little wiggle room. It’s not as though someone expects to buy a Telluride at Rio prices once they get to the dealer.

      If Fender adopted a solely direct sales model, you might not score the bag of candy, but you’d also see them gradually lower prices to remain competitive. They also wouldn’t have to pay any dealer commissions for a sale.

      • 0 avatar
        Garrett

        It’s not about them raising prices 15%. It’s about me being able to get a deal that makes sense for me.

        This is what you’re missing. Some people will go to the dealer and take what is offered. I actually don’t mind negotiating.

        CarMax is the one exception, but I never buy “popular” vehicles from them.

  • avatar
    28-Cars-Later

    This is an interesting trial balloon but I don’t think its going to work. Tesla started with no dealers, everyone else has a dealer network who isn’t going to be too thrilled because they will become less relevant. Cadillac has already run into resistance attempting to kill off its legacy network, Volvo would do wise to tread lightly.

    • 0 avatar
      SCE to AUX

      “Cadillac has already run into resistance attempting to kill off its legacy network”

      One in 6 Cadillac dealers is accepting the GM buyout money to leave, and the others are choosing to play ball. Seems like GM decided to only keep the dealers who are supportive.

  • avatar
    el scotto

    Can I use the word “Amazonized”? One of the big car companies will look at Carvana or another on-line vehicle sales company and go we can do that too. On line trade in value, on line financing in an attempt to beat yours, and fixed on line price. All the paperwork done some clicks and couple of e signatures. which brand will go first? Also, which big box retailer will be the 1st to sell barely legal Chinese made cars? Stack them deep and sell them cheap indeed. A Great Value SUV anyone?

  • avatar

    There is the easy solution – spin-off Polestar as a new company with profitable assets and liquidate the rest as a Volvo like GM did with old and new GM.

  • avatar
    Jeff S

    I would like the choice of direct sales, but I am not against the dealership model for those who want it.

  • avatar
    Art Vandelay

    If there are no dealers, to whom will I pay the “market adjustment” when I want to buy that C8, Bronco, Shelby or even a freaking Telluride if accounts here are to be believed or any other popular model. Imagine being able to pay sticker for something like a Demon? C’mon man, who wants that BS when I can give a middle man thousands over MSRP to waste hours of my time!

    And you think the manufacturer is going to do all that pinstriping, undercoating, glass etching, fabric protectant AND fill my tires with nitrogen? You need those dealers man!

  • avatar

    In my city, Volvo has the WORST advertising….the commercial is obnoxious (at least the last four of them), played at the same time evening news, and they are so grating that yes, I do have brand recall, but not the kind you want. Toss in the virtue signal speed limiters and mix with Chinese ownership, and no sale…and at the first commercial break for the evening news, it will send me running for the MUTE button. Whoever does the advertising needs to be fired pronto…and I’m the target demo for this car…I’ve already told the spouse that she can have *anything else* for our next truck…and that applies to gas, electric or unicorn farts…shame too, one of our fav cars was a square Volvo Turbo, black four door…stomped many a 320i back in the day.

  • avatar
    ToolGuy

    As Ivan Drago said to Apollo Creed:

    “You will lose.”

    https://youtu.be/PCOXsQuKnc8

  • avatar
    talber8h39

    One strange thing I learnt about the pandemic… people are nostalgic for 2003-2004 and want society’s values from then to return, and, yes, this includes car dealers.

    Yes, really… people seem to think those were better days, socially, if not technologically.

    Apparently people were more satisfied with car dealers back then.

  • avatar
    Norman Stansfield

    In other news, asteroids polled poorly with dinosaurs.

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