13 September 2024
Volvo has deep-sixed a vehicle subscription program available in more than 40 U.S. states.
Care by Volvo, launched in 2017, bundled vehicle use, road hazard coverage, maintenance and other services into a monthly payment.
Volvo on Sept. 12 told Automotive News it had suspended the program “for the foreseeable future.”
“This allows for concentrated focus on our core customer offers and the coming introduction of new products, [and an] increase in operational efficiencies,” spokesperson Russell Datz said.
Datz declined to disclose the number of subscribers and said those enrolled in the program can finish their term, after which they would be eligible for a $1,000 credit toward a new Volvo purchase or $500 toward a lease.
Volvo also is getting out of the subscription business in Europe, the automaker told Automotive News Europe.
Driving conquest
Volvo pitched the subscription program as a tool to draw younger buyers into the luxury brand with a lower price point. More than 80 percent of subscription customers were new to the brand, the automaker 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,” Volvo Car USA’s then-CEO, Anders Gustafsson, said in 2023. “The flexibility and all-inclusive offer conquests customers from other brands, but our vehicles are helping keep them with us.”
Subscriptions also were touted as an additional channel for dealers to move inventory. Like traditional new-vehicle leases and sales, dealers received a portion of subscription revenue.
Volvo retailer Matthew Haiken said subscriptions accounted for 10 percent of annual sales at his two New Jersey stores.
“The short-term flexible lease was a tool for me to get consumers to try out a Volvo who would not have even considered driving one,” said Haiken, owner of Prestige Collection. “Once they drove and experienced it, they fell in love with the car and the brand.”
The subscription program, which ended Aug. 1, also was a pipeline of higher-margin, lower-mileage certified vehicles for dealers.
Haiken said he would buy the vehicles at the end of the term. “It was a great alternative to selling late-model rentals,” he said.
Program evolution
Even as automakers such as Mercedes-Benz, Audi and Ford abandoned subscription programs and pilots, Volvo persevered and even found financial success with its initiative. Care by Volvo was profitable in the U.S. by 2020.
But it had a rocky start. Care by Volvo ran into a buzzsaw of criticism early on from some dealers who argued that Volvo was violating state franchise laws meant to prohibit manufacturers from competing with them.
A six-month investigation by California’s Department of Motor Vehicles that concluded this year sided with dealers. It found that Volvo failed to properly notify them about related changes to the franchise agreement and provided preferential treatment in allocating subscription vehicles to certain stores. The DMV also concluded that Volvo provided inadequate lease disclosures to subscription customers.
In response, Volvo rebooted the program in 2019, shortening the time it took to approve subscribers and expanding the range of eligible models. It also allowed retailers to offer vehicles in stock to subscription customers. Originally, customers had to order their vehicles.
A later update let subscribers swap vehicles or terminate the subscription without penalty after five months.
“It became clear to us that we needed to provide more differentiation between our current subscription and a lease,” Peter Wexler, who headed Care by Volvo U.S. at the time, told Automotive News after the revamp. “The most natural way to do that was to introduce more flexible terms.”
Pet project
Care by Volvo was a key initiative under former CEO Hakan Samuelsson, who timed the program’s launch to coincide with the debut of the automaker’s first compact SUV, the XC40.
“His vision was clear,” Volvo marketing expert Thomas Andersson told Automotive News Europe in 2017 when asked about Samuelsson’s vision. “You enjoy the vehicle. We will take care of the rest.”
Andersson referred to it as “a revolution for the commercial part of the business.”
But when Samuelsson stepped down as Volvo Cars CEO in 2022, the program lost its strongest backer.