Volvo readies subscription reboot in U.S.

After more than two years of protest from California dealers, Volvo Cars USA will replace a controversial subscription program in its biggest market.

The Swedish automaker plans to introduce an updated -- and more dealer-friendly -- version of the Care by Volvo program in California.

But still unclear is whether the changes in the newer version will satisfy the California dealer complaints.

The original Care by Volvo launched in 2017 as a two-year subscription service. The program bundles the use of a vehicle, insurance and maintenance costs into a monthly payment that ranges from $700 to $800 (499 euros to 899 euros in Germany), depending on the vehicle. After a year, subscribers can swap for a different vehicle.

The California Department of Motor Vehicles earlier this year deemed the subscription service to be in violation of several state franchise and consumer protection laws.

Last autumn, Volvo broadened the service to include more models and make some dealer-friendly updates. The reboot, referred to as Care By Volvo 2.0, is now available in about 15 states.

“Care by Volvo 2.0 was created in partnership with Volvo retailers and further expands consumer choice by allowing them to select a vehicle from retailer inventory,” Volvo spokesman Russell Datz said Tuesday.

The Volvo program has been a point of contention with the California New Car Dealers Association, which represents two dozen Volvo dealers. The group has argued that by offering subscriptions directly through its website, Volvo was violating state law meant to prohibit manufacturers from competing with their franchisees.

In January 2019, the association filed a petition with the state's New Motor Vehicle Board arguing the legality of Care By Volvo. Last August, the board directed the Department of Motor Vehicles to investigate.

A six-month investigation by California's Department of Motor Vehicles concluded earlier this year found that Volvo failed to properly notify dealers about changes to their franchise agreement related to the subscription program. It also concluded that Volvo provided inadequate lease disclosures to subscription customers.

In addition, the DMV found Volvo provided preferential treatment in allocating subscription vehicles to factory-controlled stores.

In a letter dated April 28, the department warned Volvo that future violations might lead to "enforcement actions" but stopped short of taking any punitive steps.

At a California New Motor Vehicle Board hearing on July 10, Volvo said it would halt the original version of the subscription service in California and work with the DMV and retailers to ensure the revised program does not violate state franchise laws.

“The board’s decision last week to conclude the petition process related to Care by Volvo 1.0, allows Volvo to focus on finding a path toward the successful launch of Care by Volvo 2.0 in California,” Datz said. He did not say when the updated subscription program would roll out in California.

Brian Maas, president of the California New Car Dealers Association, welcomed Volvo's decision to discontinue the original version of the program there.

"It is critical that manufacturers abide by California franchise laws to continue protecting dealers and consumers," Maas said. "Our dealer members support innovation. At the same time, the DMV findings and Volvo's recent termination of the program further demonstrate that illegal behavior by manufacturers will not be tolerated."

Volvo also shortened the time it takes dealers to qualify, approve and get subscription customers into vehicles. Retailers can now offer vehicles on their lots to subscription customers. Under the original program, subscription customers would have to order their vehicles.

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," Volvo Car USA CEO Anders Gustafsson said last summer. "The majority of the dealers understand what we are trying to achieve."

The subscription program is a priority for Volvo, Gustafsson emphasized.

Care by Volvo is "100 percent prioritized," he said. "This is going to help provide dealers with another tool to make them money."