California dealers try to block Volvo's car subscription service

A trade group representing California car and truck dealers has filed a petition with the state's new Motor Vehicle Commission to stop Volvo from offering cars on a subscription basis, The Verge reported. The filing, first reported by Teslarati, is an escalation of the dealer group's efforts to undermine Volvo's subscription plan, which was made public late last year after a letter was sent to the CEO of the Swedish automaker's North American division.

The subscription service, called Care by Volvo, was announced in late 2017. Customers "subscribe" to a car for two years, making fixed monthly payments of about $750 (prices vary by model). The price is a bit more than a typical lease — it includes insurance and maintenance, and there's no upfront payment — and customers can also buy a new car after 12 months, similar to how Apple runs its iPhone Upgrade Program. Customers still pick up their cars at Volvo dealers, though.

The group trying to stop Care by Volvo is the California New Car Dealers Association (CNCDA), which represents more than 1,000 franchised car and truck dealers across California, according to the document. CNCDA called Care by Volvo a "clever but illegal marketing ploy." The group said Volvo's focus was simply on "all-inclusive" two-year leases that have a fixed, standardized, predetermined monthly fee that "includes the cost of the vehicle, insurance, maintenance, road hazard protection and normal wear and tear." The group also pointed out that Volvo itself uses the word "lease" in internal documents about Care by Volvo and in documents provided to customers.

By offering all of these services that are usually included in a traditional lease, the CNCDA said Volvo has “usurped the traditional sales role of Volvo dealer franchisees." This violates state law that prohibits competition between manufacturers and dealers, the group argues, because the franchisees are trying to sell or lease the same vehicles that Volvo offers to order. It also violates Volvo’s franchise agreements with dealers, they say.

“[Care by Volvo] is not just an alternative to traditional car buying methods; [Care by Volvo] is a direct competitor to Volvo dealers,” attorneys for the CNCDA wrote in the petition.

The block on Volvo's subscription service is the latest sign of growing tensions between dealers and automakers as the latter try to find new business models. While overall auto sales have generally remained strong, the growth trend has gradually slowed in 2018. At the same time, companies like Tesla are putting pressure on traditional automakers to try new ideas such as subscriptions and even direct sales. In fact, Tesla has been fighting dealer associations across the country for the past few years and is still not allowed to sell directly to consumers in certain states.

Volvo is far from the only automaker to experiment with subscription models. Mercedes-Benz, BMW, Audi, Jaguar, and Porsche all have different versions of subscription services. General Motors Co. also piloted one with Cadillac but decided to shelve it in November. Each automaker has seen varying degrees of success, and they’re also piloting it in different locations, at different pricing tiers, and in different volumes. Volvo has had success, with sales of its new compact SUV, the XC40, booming by the end of 2018. (That’s despite its terrible start.)

Executive Director Timothy M. Corcoran told The Verge in an email that members of the new Motor Vehicle Commission have made no decision on the CNCDA’s petition. According to the commission’s website, the petition must be reviewed by the board’s legal staff before it can be discussed at the next regularly scheduled board meeting. Representatives for Volvo and the CNCDA did not immediately respond to requests for comment.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.