Volvo adds flexibility to subscription program

Volvo Cars' subscription service, with its two-year lock in period, has been criticized as just a glorified lease. In response, the Swedish automaker has tweaked its newly profitable Care by Volvo program to make it more attractive.

Customers can now swap their Volvo in as little as four months instead of every year, and they can even cancel their membership.

"It became clear to us that we needed to provide more differentiation between our current subscription and a lease," Care by Volvo U.S. chief Peter Wexler told Automotive News last week. "The most natural way to do that was to introduce more flexible terms."

The reduced time commitment comes as the COVID-19 pandemic hampers economic activity and threatens job security.

"Our intention with this new option is to provide peace of mind and a sense of security that if things do change, customers have the flexibility to do what works for them — either changing into another Volvo vehicle or canceling the subscription," a spokesman said.

Dealers were told of the change last month and it went into effect immediately.

Matthew Haiken, owner of Prestige Volvo in East Hanover, N.J., is hopeful the adjustment will drive customer adoption of the new mobility model.

Subscription programs, in general, haven't taken off, he said. "Volvo is trying to throw as many things as possible against the wall to see if there's an opportunity," Haiken said. "If this could move the needle and we could get one more new customer to consider our brand because of it, I'm all for it."

While Volvo remains committed to making subscriptions work, other brands have dropped their efforts or are scaling them back. BMW is modifying its two-year subscription pilot in Nashville. The automaker told customers it will eliminate unlimited vehicle swaps, starting Nov. 20.

"We are currently working on the next iteration of the Access by BMW vehicle subscription program," a spokesman said.

Care by Volvo, which launched in 2017, consolidates the use of a vehicle, insurance and maintenance costs into a monthly payment that ranges from $650 to $750 for preconfigured subscription vehicles. The service got off to a rocky start — drawing protest from some dealers who argued that by offering subscriptions through its website, Volvo was violating state franchise laws meant to prohibit manufacturers from competing with their franchisees.

A six-month investigation by California's Department of Motor Vehicles that concluded earlier this year sided with dealers. It found that Volvo failed to properly notify them about related changes to the franchise agreement and that it provided preferential treatment in allocating subscription vehicles to factory-controlled stores. The DMV also concluded that Volvo provided inadequate lease disclosures to subscription customers. As a result, Volvo suspended its subscription program in the state, its largest U.S. market. The program is now offered in 42 states.

As part of a reboot last year called Care by Volvo 2.0, the company shortened the time it takes to approve subscribers and expanded the range of eligible models. Retailers can now offer vehicles on their lots to subscription customers. Under the original program, customers had to order their vehicles.

With steady growth since May, Wexler said subscription "numbers are starting to become a meaningful size" and that the program is now profitable, though he declined to disclose total subscriber count or other figures.

"The key to making this work is to figure out the insurance [component]," Wexler said. "We've developed a tailor-made insurance product. We've spent a really good time perfecting it."