Volvo tweaks subscription service, adding crossovers, vehicles on lot

Volvo is expanding its controversial subscription program to include more crossovers, and it is making tweaks to allay dealer concerns.

The revamped Care by Volvo program, expected to be announced Monday, Aug. 26, has shortened the time it takes dealers to qualify, approve and get subscription customers into vehicles. Volvo will also cover subscription customers with a new group policy that will make it easier and faster to get insured.

In response to dealer feedback, Volvo will now allow retailers to offer vehicles on their lots to subscription customers. Under the original program, subscription customers would have to order the car.

"We have built in all the components that would enable the dealer ... to spot-deliver a vehicle as a Care by Volvo vehicle," Peter Wexler, head of Care by Volvo in the United States, said in a dealer communication. "We want to offer our retailers what we call the third option."

Care by Volvo has been expanded to include the XC60, XC90 and V60 Cross Country wagon, in addition to the XC40 compact crossover and S60 sedan currently offered. Only certain variants of these models will be offered as part of the subscription program.

By expanding the product options, Volvo hopes to reach a wider demographic. More than 80 percent of subscription customers are new to the brand, Volvo said.

Care by Volvo, launched in 2017, is a two-year subscription service. The use of a vehicle, insurance and maintenance costs are rolled into a monthly payment that ranges from $700 to $800, depending on the vehicle. After a year, subscribers can swap for a different vehicle.

The subscription program offers Volvo dealers another avenue to move vehicles. Just like with traditional leases and sales, dealers receive a margin on subscription sales.

"This is going to help provide dealers with another tool to make them money," Volvo Car USA CEO Anders Gustafsson told Automotive News last week.

A pilot of the revamped subscription program will launch Oct. 1 with 11 Volvo dealerships in New Jersey. A nationwide rollout is expected by year end.

Dealer Todd Bondy sees the subscription program as added business.

"Any way they can put more money in my pocket, the better," said Bondy, operating partner at Volvo Cars of Oklahoma City. "Subscriptions certainly erode opportunities for finance, but having a program like this might provide incremental revenue opportunities."

The reboot comes as Care by Volvo has faced some dealer pushback.

The California New Car Dealers Association, which represents nearly two dozen Volvo dealers, filed a petition Jan. 15 with California's New Motor Vehicle Board, arguing that the Care by Volvo subscription program violates state law meant to prohibit manufacturers from competing with their franchisees.

The California Department of Motor Vehicles will investigate Volvo's subscription program for violations of state franchise laws following arguments by the dealer association before the motor vehicle board this month. 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 dealer association. If violations are found, it may lead to disciplinary action against Volvo's DMV license, according to the dealer group.

Gustafsson said Volvo has not been asked to discontinue Care by Volvo and welcomes the California DMV investigation.

"Someone is making a mountain out of a molehill," Gustafsson said. "If we have done something wrong, we will change it. We don't think we have done anything wrong, and it has never been our intention."

Gustafsson suggested the California New Car Dealers Association is undermining Volvo's program on the behest of the group's non-Volvo dealer members, concerned subscription programs will catch on.

"We are such a small player," he said. "They are nervous that if we have a success with this, the really big [automakers] ... will start to implement" subscriptions.

For Volvo, the subscription program has been a learning experience.

"It has been a bumpy start with a lot of emotions. We have learned and we have listened," Gustafsson said. "The majority of the dealers understand what we are trying to achieve."

Gustafsson is confident the subscription program, one of the top three priorities for the company, will continue and evolve.

Care by Volvo is "100 percent prioritized," he said.