The California Department of Motor Vehicles will investigate Volvo's Care by Volvo subscription program for violations of state franchise laws following arguments by the California New Car Dealers Association before the state's New Motor Vehicle Board last week.
The board unanimously voted Aug. 15 to direct the state DMV to investigate Care by Volvo and four claims that the program violates provisions of the state vehicle code, according to the dealers association. If violations are found, it may constitute disciplinary action against Volvo's DMV license, according to dealers group.
The dealers association submitted its petition to the New Motor Vehicle Board in January and a public hearing was held last week. Before petitioning the board, the dealers association late last year asked Volvo to immediately halt its program in California after its review of Care by Volvo found what it alleged were violations of California franchise and consumer protection laws.
The DMV will review whether Care by Volvo diverts customers from dealers to Volvo, if Volvo failed to properly notify franchisees and the board about the program, if Care by Volvo preferentially allocates vehicles and sales to certain dealerships, and if the program "undermines the purpose of prohibiting payment packing," according to the dealers group, which represents nearly 1,200 new-vehicle dealerships, including nearly two dozen Volvo dealers.
Brian Maas, president of the dealers association, said he was pleased the New Motor Vehicle Board agreed the DMV should investigate the association's four claims against Volvo.
"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," Maas 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."
Volvo, in a statement, defended Care by Volvo and said it has changed the program since receiving feedback from dealers.
"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 USA spokesman said in an emailed statement. "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."
Care by Volvo launched in 2017 and is a two-year subscription service. Use of a vehicle, insurance and maintenance are rolled into one monthly payment. After a year, subscribers can swap for a different vehicle.
The New Motor Vehicle Board wants the DMV within 180 days to provide it with a report on results of the probe.