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Volvo Subscription Service Has Found A New Enemy

Subscription / 3 Comments

And it's called, California.

Subscription services are a new way for automakers to offer their vehicles with a no-cost ownership experience at an affordable price. It basically works like a lease, but your maintenance and insurance are included in the cost. Volvo jumped in early with its Care by Volvo Service, which initially offered the XC40 crossover but has since expanded to include the S60 sedan.

Some other automakers have experienced supply and demand issues with their subscription services - Lincoln sticks out as an example - but now some subscription services are starting to be faced with government interference.

Volvo
Volvo

It all started about a year ago when Care by Volvo faced scrutiny from dealerships, who claimed the service infringed on dealer franchise laws. According to a report from Automotive News, Care By Volvo will now be investigated by the California Department of Motor Vehicles for violations against state franchise laws. The investigation comes following arguments by the California New Car Dealers Association at the New Motor Vehicle Board. The Board unanimously voted for the DMV to investigate and if violations are found, Volvo could face disciplinary action. Prior to arguments, the Dealers Association asked Volvo to halt its subscription service in the state of California.

"This is just the first step in ensuring that manufacturers, specifically Volvo, stop going around their franchisee business partners in an attempt to retail vehicles directly. Franchise laws exist to protect dealers from this type of behavior," Biran Maas, president of the dealers association said in a statement. "Our dealer members support innovation, including subscription-based models, but we are against violating the law. There is a right way and a wrong way to do business in California, Care by Volvo is the wrong way."

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Volvo
Volvo
Volvo

"Volvo Car USA is committed to developing Care by Volvo in collaboration with our retailers to offer the flexibility of subscription side-by-side with traditional lease and financing," a Volvo Car USA spokesman said in a statement to Automotive News. "We continue to improve the program, which will soon enable retailers to complete subscription purchases and provide instant vehicle delivery. Volvo Car USA believes the addition of a subscription option on the sales floor will benefit both customers and retailers."

The issue here boils down to whether or not Care by Volvo (and other services like it) divert sales from dealers to the company itself. The US has laws that heavily protect dealerships and prevent automakers (like Tesla in some states) from selling directly to consumers.

Volvo
Volvo

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