Volvo CEO stirs up new angst among U.S. dealers

Volvo Cars will introduce a direct-to-consumer sales model in the United Kingdom by the end of this year. And the Swedish automaker intends to export the concept to additional markets.

The notion is already causing unease among Volvo's American dealers.

Former Dyson exec and Volvo's newly minted CEO, Jim Rowan, said he believes the traditional way of selling big-ticket vehicles through third parties is "flawed."

"It seems strange for me coming from the consumer electronics and technology industry that you can sell a product which is $40, $50, $60,000 of value to a customer that you never speak to pre-sales and you never speak to post-sales," Rowan said on an earnings call Thursday, referring to the lack of direct factory-consumer relations.

"That's a flawed business model, especially in today's world when we've got so much connectivity at our fingertips. We need to be part of that conversation."

Rowan did not reveal where else Volvo might expand its controversial retail model. But if the auto industry outsider aspires to bring it to the world's second-largest market, he could be in for a bruising.

Volvo Retail Advisory Board Chairman Ernie Norcross said U.S. franchise laws, meant to protect the dealer network, will prevent a direct consumer model.

"Mr. Rowan is moving head-on to a fight with the dealer network," Norcross told Automotive News. "We do not feel respected or valued as partners with his comments."

If Volvo attempts to bring its direct sales model to this side of the Atlantic, it will push U.S. retailers into a "defensive posture," said Norcross, owner of Volvo Cars Memphis in Tennessee.

Rowan said Volvo's experience with the controversial retail model in the U.K. will determine how it's rolled out to other markets.

"We're going to learn so much," said Rowan, who took over the top job last year. "It would benefit us to say, 'OK, let's see what we learned here, what didn't work, and how will we change that for the next market?' "

Tesla's success with its no-haggle, direct-to-consumer sales model has competitors rethinking their retail strategies.

Mercedes-Benz, BMW and Stellantis favor an "agency" model — albeit outside the U.S. The concept offers automakers cost savings on distribution, generally calculated to be 30 percent of the vehicle's cost.

Volvo's interest in direct sales began well before Rowan's tenure. The idea was championed by former CEO Hakan Samuelsson, who pushed an ambitious digital-first sales model for the company's electric vehicles.

In 2021, Volvo committed globally to becoming anEV-only brand by the decade's end. It announced it would move to an online-only, factory-set price sales strategy for its future battery-powered models.

Speaking to Automotive News in 2021, Samuelsson said, "The sales competence would move a bit away from knowing a lot about financing and different lease models because that will be done, preset, on the Web page. But knowing the car, explaining all the features in the car — that will be a very important role" for dealers.

Samuelsson's comments at that time sparked a firestorm of protest from Volvo's U.S. dealers.

Dealer associations in at least two states — Virginia and California — sent Volvo letters warning that the strategy might violate the automaker's dealer agreements or state laws meant to prevent automakers from competing with their franchises.

That led Volvo's outgoing U.S. boss Anders Gustafsson to go on a six-city roadshow to reassure retailers they will continue to sell the vehicles and maintain the customer relationship.

"Hakan ran into the U.S. dealer network brick wall," Norcross said. "Unfortunately, we have to educate the new regime about what you can and can't do because of U.S. franchise laws."

Volvo risks touching the third rail of factory-dealer relations as it strives to develop a more direct relationship with customers.

But Rowan is running with the playbook because he said it "has so many proof points for us as a business."

Rowan said it doesn't matter how the consumer buys Volvos — whether from a living room couch or in a brick-and-mortar dealership.

"What I care about is that at every single touchpoint [in the shopping journey], we are connected with our customer," Rowan said on the earnings call. "So if you go to a dealership, you're still buying from Volvo.com, and we are still part of the conversation."

"That gives us access to that customer, that customer data," "he said. "It gives us a much better chance of continuing engagement with that customer to find out what they like about the product, what they don't like about the product, and hopefully keeping them as a lifelong customer."

That kind of talk from Gothenburg no doubt makes Volvo retailers in the U.S. jittery once more.

"Our expertise is [the automaker's] weakness — developing a personal relationship with the end consumer," Norcross said. "That relationship starts on our websites, then evolves when they walk into the store. We build value in the product to justify the OEM price."