As Volvo Cars transforms into an EV-only brand in less than a decade, it is reinventing the way it will sell the next-generation vehicles.
The automaker last week announced plans to move to an online-only, fixed-price sales model for its expanding fleet of battery-powered models.
Volvo's all-digital strategy will have ramifications for the brand's 281 U.S. dealers.
Retailers are "concerned and fearful" about where they stand, Volvo Retail Advisory Board Chairman Ernie Norcross told Automotive News last week.
"Dealers always want to control the consumer experience from start to finish," said Norcross, owner of Volvo Cars Memphis in Tennessee. "If we don't control the buying experience, how are we anything but a delivery and service center?"
Volvo Car USA CEO Anders Gustafsson was quick to attempt to calm dealers' nerves.
Dealers will continue to sell the vehicles and maintain the customer relationship, Gustafsson said.
"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."
Volvo Cars global boss Hakan Samuelsson sees the role of the dealership evolving as car-buying gravitates online.
"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," he said. "But knowing the car, explaining all the features in the car ... that will be a very important role" for dealers.
While Volvo won't completely abandon gasoline engines until 2030, the shift to online-only sales has begun. Last week, the automaker debuted its second battery-electric vehicle — the sporty C40 Recharge compact crossover. Consumers must reserve the electric vehicle online, with U.S. deliveries expected to begin early next year.
The Swedish brand has not been shy about experimenting with innovative business models — even if that tends to rankle its retail partners.
In 2017, Volvo launched a subscription program that consolidated the use of a vehicle and insurance and maintenance costs into a monthly payment. But the program ran into a buzz saw of criticism from some dealers who argued that Volvo was violating state franchise laws meant to prohibit manufacturers from competing with their franchisees.
But Volvo stuck to its guns and made adjustments to the subscription program to quell dealer concerns. Care by Volvo is currently offered in 43 states.
In its embrace of digital retail, Volvo is responding to a generation of shoppers who buy everything from shoes to smartphones with the click of a button.
California-based electric car maker Tesla was quick to cater to that demand and has had success with its no-haggle pricing and digital-first retail model.
"What we've found is consumers love the online experience, and dealers can make more money moving their processes online," said Akshay Anand, executive analyst at Kelley Blue Book.
But not everyone is convinced that buying a luxury crossover is like buying a pair of loafers.
A vehicle purchase is an emotional process, said Adam Simms, co-owner of Price Simms Auto Group.
"We have to engage with the prospect not just on the product, but on their passion about what they want to drive," said Simms, a Bay Area Volvo dealer. "I am not sure a website emotionally engages people like humans do."
With consumers doing more car-shopping from their living rooms, automakers and their retailers face a conundrum.
Dealerships have been built as sales venues, with grand showrooms and space for large inventories, Anand said. "Changing the sales process may be easier — and cheaper — than changing the physical space."
That's a concern for Todd Bondy, operating partner at Volvo Cars Oklahoma City. "We have some big investments in real estate that the manufacturers have all been pushing over the last several years," Bondy said. "It's very likely that the footprint that we have now is going to be obsolete."
In its march toward digitalization, Volvo also is altering how dealers source inventory. Volvo will maintain a central stock, delivering customer-ordered vehicles to dealerships rather than having retailers order and carry the inventory on their floorplan.
Retailers "are going to have cars outside their dealership, but it will be on our books," Gustafsson said.
"We are taking a bigger responsibility from the planning point of view. We need to have by far higher demand; we need to have state-of-the-art marketing."
Volvo seeks to move away from the "push mentality" in auto retailing, where dealers resort to discounting to move vehicles sitting on their lots.
"The culture of how we have sold cars historically is related to how many cars you have outside your dealership," Gustafsson said. "That is kind of producing an unhealthy focus."
Some Volvo dealers fear that not having a lot full of new cars would put them at a competitive disadvantage. And they are skeptical that Americans would be willing to wait several days for delivery.
Consumers want breadth and depth in vehicle selection — and they want it now, Simms said.
"It's going to be hard when the Toyota dealer down the street is sitting there with 400 cars while the Volvo dealer is sitting there with one car," Simms said.
Gustafsson declined to say how long it would take to fill digital orders. "It depends on [consumer] interest and our production capacity," he said. "It's going to be tougher on new models because everyone would like to have the latest and the greatest."
To reduce complexity and speed deliveries, Volvo will limit the number of variants and packages offered on its BEV models.
"We have 1.6 million different versions in our product portfolio, and that is not smart," Gustafsson said.
"It's very, very complicated for the manufacturing structure [and expensive for dealers]. We need to ... make sure we have the most beautiful cars in our portfolio with the specifications that customers are asking for."
And to allay consumer concerns about the reliability of EV technology, Volvo will include service, warranty work and roadside assistance for the first three years.
"This is an offer structure that is going to be extremely convenient for the consumer," Gustafsson said, while guaranteeing dealers service and warranty revenue.
Even so, dealers have a lot of questions about profitability in the new business model.
"Will the margin compensation for BEVs be the same" as on internal combustion engine models? Norcross asked. "We are currently having that conversation."
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.
