DETROIT — Volvo will need the help of U.S. dealers to make its bold product and sales strategy successful.
During a speech at the Automotive News World Congress last week, Volvo North America CEO Anders Gustafsson said the automaker needs to ensure strong residual values and premium brand perception in order to run a successful subscription sales model and sell electrified vehicles — goals that can be achieved only if retailers are on board.
Dealers "need to trust that we do this because we'd like to maintain revenue and profit in our family," Gustafsson said.
In his first week on the job, Gustafsson met with dealers across the country to communicate Volvo's new strategy and ease any concerns. The initial meetings didn't go smoothly.
"That first meeting was extremely painful," he said, adding that he "lost 3 kilos" after facing angry dealers.
Under the ownership of China's Zhejiang Geely Holding Group, Volvo has experienced a major sales turnaround in the last three years, selling 571,577 vehicles worldwide in 2017, up 7 percent from 2016. Despite that success, Gustafsson said, the company is looking to get ahead of trends such as digital sales and tighter emissions regulations.
In July, Volvo said it would electrify every vehicle introduced in 2019 and beyond. When it unveiled the XC40 compact crossover in September, it also introduced its Care by Volvo subscription service, a two-year flexible-ownership model that includes insurance and concierge services.
Volvo's EV plans immediately created dealer pushback, Gustafsson said. "You have some parts of this country that aren't so much into electrification," he said.
The subscription service also rankled retailers who saw it as undermining the traditional franchise model. However, since dealers see most profits in financing, used cars and service, Care by Volvo allows the dealership to capture more of that business by ensuring the customer uses the retailer as their primary point of communication, Gustafsson said.
A two-year subscription model will turn profits only if vehicles can hold up for more than one term, and customers continue to opt in to the program, the executive said. With the services dealers can provide, they can increase the possibility of Volvo hitting these targets, and the automaker plans on giving its retailers every tool necessary to do so.
"We need to give love to the dealers we have today," Gustafsson said. "They've been waiting many, many years."