Volvo reboots, revives subscription service in Calif.

Volvo Cars is reviving a vehicle subscription service in California, less than three years after the program was booted from the key market for violating state franchise laws.

The latest program, slated to launch next month, ends a four-year battle between Volvo and its California dealers to introduce the service that now bundles vehicle use, road hazard coverage, maintenance and other services into a monthly payment.

Care by Volvo offers a two-year term, but subscribers can change vehicles or cancel the subscription without penalty after five months.

"Giving customers the freedom to move in a personal, sustainable and safe way is our mission," Volvo Car USA outgoing CEO Anders Gustafsson told Automotive News. "Working with our retailer partners to offer the flexibility to do so is one way we are fulfilling our mission."

Launched in 2017, Care by Volvo was a key initiative under former CEO Hakan Samuelsson. Volvo views the subscription program as another channel for dealers to move inventory. Like traditional new-vehicle leases and sales, dealers receive a margin on subscription volume.

In California, Volvo is marketing a revamped version of the original subscription program that ran into dealer opposition in several states.

Dealer associations argued that Volvo's initial plan violated state franchise laws prohibiting manufacturers from competing with franchisees by offering subscriptions through its website.

In response, Volvo rebooted the program in fall 2019, shortening the time it took to approve subscribers and expanding the range of eligible models. Retailers can now offer vehicles in stock to subscription customers. Under the original program, customers had to order their vehicles.

"It became clear to us that we needed to provide more differentiation between our current subscription and a lease," Care by Volvo U.S. former chief Peter Wexler told Automotive News following the revamp. "The most natural way to do that was to introduce more flexible terms."

The revised California subscription service is similar to Volvo's program in New York: Customers can choose a vehicle from retailer stock and must secure their own insurance coverage.

Brian Maas, president of the California New Car Dealers Association, said the new Care by Volvo is "significantly different than the earlier iteration, which was found to violate California law by our DMV."

Volvo retailers are the contact point for subscription consumers and are free to price the vehicles, Maas told Automotive News. Also, Volvo won't offer a competing lease product.

"Dealers would not be mere 'delivery agents' for Volvo, which was a fatal flaw previously," Maas said.

Volvo's original subscription program raised the ire of the California New Car Dealers Association.

The group argued that by offering subscriptions directly through its website, Volvo violated state law meant to prohibit manufacturers from competing with franchisees.

In January 2019, the association filed a petition with the state's New Motor Vehicle Board arguing the legality of Care by Volvo. In August, the board directed the state's Department of Motor Vehicles to investigate.

"Volvo is deceiving consumers by saying this is a subscription program; it's actually a lease," Maas told Automotive News in 2020.

The association, at the time, asked Volvo to "immediately suspend" the subscription program in California. It also urged the California New Motor Vehicle Board to impose disciplinary action, including financial penalties, on Volvo.

A six-month investigation by California's Department of Motor Vehicles that concluded in 2020 sided with dealers. It found that Volvo should have notified them about related changes to the franchise agreement correctly and that it provided preferential treatment in allocating subscription vehicles to factory-controlled stores.

The DMV also concluded that Volvo provided inadequate lease disclosures to subscription customers. The department warned Volvo that future violations might lead to "enforcement actions" but stopped short of taking any punitive steps.

Shortly after, Volvo halted the subscription program in California.

While several automakers such as Mercedes-Benz, Audi and Ford have abandoned subscription programs, Volvo has persevered, expanding its service to 45 U.S. states.

Care by Volvo is "100 percent prioritized," Gustafsson said earlier. "Subscription is one of our biggest focus areas in the future, especially in the U.S. market, because we think this is what customers are asking for."

Gustafsson said vehicle subscriptions are "another tool in the portfolio" for dealers to make more money while bringing new and younger buyers to the brand. More than 80 percent of subscription customers are new to the brand, Volvo said previously.

"This program was designed to help us capture a new audience and introduce them to the safety, sustainability and technology benefits of driving a new Volvo car," Gustafsson said. "The flexibility and all-inclusive offer conquests customers from other brands, but our vehicles are helping keep them with us."

Volvo said the subscription program is profitable but declined to disclose the number of subscribers or other figures.