Volvo agreed to revamp its car subscription service to appease auto dealers during a July 10 hearing before the California New Motor Vehicle Board, reports The Car Gossip. Volvo will work with the Department of Motor Vehicles and California auto dealers to create the reimagined Care by Volvo car subscription service to ensure that it does not violate state franchise laws. Timing of the roll out of a new subscription program has not been disclosed.
“It is critical that manufacturers abide by California franchise laws to continue protecting dealers and consumers,” said Brian Maas, president of the California New Car Dealers Association (CNCDA). “Our dealer members support innovation. At the same time, the DMV findings and Volvo’s recent termination of the program further demonstrate that illegal behavior by manufacturers will not be tolerated.”
Volvo launched the car subscription program in 2017, among one of the first automakers to try the subscription model. At launch, the company said their subscription program would make “having a car as transparent, easy and hassle free as having a phone.” Hassle free is not how California auto dealers would describe Volvo’s car subscription service, however. In fact, in January 2019, the CNDA, which represents more than 1,000 car and truck dealers, filed a petition with California’s New Motor Vehicle Board to claim that the car subscription service threatened the franchise business model that auto dealers rely on.
The CNCDA said that Care by Volvo is not really a subscription, but an illegal marketing ploy. They claimed the car subscription service was really a two-year lease for an all-inclusive, fixed monthly fee that covers the vehicle cost, insurance, maintenance, roadside assistance and normal wear-and-tear. The CNCDA’s petition also stated that the Care by Volvo subscription service “constitutes illegal competition between manufacturer and dealer” and “usurps the traditional sales role of Volvo dealer franchisees.” For relief, the CNCDA asked the Board to conduct an investigation and provide a written report, or order the DMV to initiate disciplinary proceedings against Volvo, if the investigation supports the CNCDA’s claims.
In August 2019, the (California) New Motor Vehicle Board voted unanimously to investigate the Care by Volvo subscription service and the CNDAs claims that the service violates the state vehicle code. The NMVB has asked for a written report of the investigation within 180 days. Two weeks later Volvo agreed to make changes to its program, but Volvo Care USA CEO Anders Gustaffson told Automotive News that the company hadn’t done anything wrong.
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“Someone is making a mountain out of a molehill,” Gustafsson said. “If we have done something wrong, we will change it. We don't think we have done anything wrong, and it has never been our intention.”
After a six-month investigation, the Department of Motor Vehicles agreed that Volvo had not properly notified dealers about changes to the franchise agreement regarding the subscription program, and that the company had not provided sufficient lease disclosures to subscribers. Also, subscription vehicles were preferentially made available to factory-controlled stores. As a result, Volvo will make changes but what they will be and how they will satisfy the legal requirements while appeasing California dealers has yet to be seen.
This has been a long-running battle and a source of frustration for both auto dealers and Volvo. This battle shows that you can’t just call something a subscription to make it appear shiny and new. Subscriptions aren’t a marketing ploy or strategy. They are a legitimate business model that serve many industries well, when done properly. It appears that Volvo may have taken some shortcuts here, and that is bad for everyone, not just Volvo and the auto dealers. We hope this turns into a learning opportunity, and that Volvo can make this right with the dealers it has come to depend on.