California Dealers File Petition Against 'Care By Volvo' All-Inclusive Car Subscription Service
A California dealer group has filed a petition with the state’s New Motor Vehicle Board to block Care by Volvo, a subscription service that offers an alternative to conventional buying and leasing. The group claims it poses a threat to the business model of franchised car dealers.
Care by Volvo bundles insurance and maintenance, as well as the cost of the vehicle itself, into a single monthly fee. Customers sign up for two-year terms, but they can also trade in their cars for new ones after one year. This model removes some of the hassle of going to a dealer and haggling over price, but still keeps dealers in the loop: customers take delivery of their cars at dealerships, which also perform all maintenance.
The petition, first reported by Teslarati, was filed by the California New Car Dealers Association (CNCDA), which claims to represent more than 1,000 franchised dealers in the Golden State. Late last year, the group sent a letter to Anders Gustafsson, CEO of Volvo Cars of North America, asking to stop the rollout of Care by Volvo in California.
In its petition, the CNCDA calls Care by Volvo a “clever, but illegal, marketing ploy.” The group claims Care by Volvo subscriptions are really just leases, claiming Volvo even uses the term “lease” to describe Care by Volvo in both internal documents and information provided to customers. Said documents are included as evidence in the petition.
Because Care by Volvo is allegedly similar to a lease, the CNCDA argues that it “usurps the traditional sales role of Volvo dealer franchisees.” The group argues that Care by Volvo violates California laws against automakers selling cars in competition with franchised dealers, as well as the franchise agreements Volvo has with its dealers. The CNCDA argues that the service constitutes a “direct competitor” to Volvo’s franchised dealers. Volvo did not respond to a request for comment in time for publication.
The debate over alternatives to franchised dealers has been going on for some time. Tesla, which sells all cars directly to customers online and through company-owned stores, has grappled with car-dealer groups in various states for years. The automaker still can’t sell cars in certain states due to pushback from dealers, and state laws that prevent automakers from selling cars directly to customers.
Yet subscription services are proving popular among automakers, although many are currently operating as small pilot programs. Audi, BMW, Ford, and Mercedes-Benz have tried subscription services, as did Cadillac before deciding to shelve its Book service in November. Lincoln operates a subscription service for used cars.
Because customers often dread going to a dealership, subscription services could also be a powerful tool for moving metal. After getting off to a rocky start, Care by Volvo proved so popular with customers that Volvo temporarily ran out of XC40s allocated for the program. It’s results like this that make subscription services a threat to franchised dealers, and it’s why those dealers will likely continue to fight them.
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