Care by Volvo subscription service could soon expand to used cars
Volvo's North American CEO, Anders Gustafsson, talks about what's next for the Care by Volvo subscription service, and the hurdles the company has faced along the way.
Slowly but surely, Volvo will expand its Care by Volvo vehicle subscription service to its entire lineup of new cars and SUVs. But Volvo is also looking at the subscription model for another important part of the car-buying space: the certified pre-owned (CPO) market.
"I think that is probably the next step," Volvo's North American CEO, Anders Gustafsson, told Roadshow in an interview this week. A used-car subscription service "is probably 50 percent of the questions that we receive from our customers and from our retailers." As for when we could see something like this come to fruition, Gustafsson ballparks, "Let's say one year."
With the Care by Volvo new car subscription service, buyers can bundle the cost of the vehicle, maintenance fees and even a premium insurance plan into one monthly fee. Care by Volvo subscriptions last for two years, with the ability to swap out for another vehicle after one year. When the customer is finished with the vehicle, it's simply handed back over to Volvo.
The XC40 compact crossover was the first vehicle to launch with the Care by Volvo subscription service.
"We need to handle the car as used car," Gustafsson said. "You need to have processes for that. You need to be able to take the pressure on residuals." (A residual value is how much a vehicle is expected to be worth at the end of a lease -- or, in this case, a subscription.)
It stands to reason, then, that Volvo could offer these CPO Care by Volvo cars through a similar service.
"Even if you have a great CPO process with warranty and so on, [customers] would like to get one price," Gustafsson said. "Customers don't want to go into the negotiation part. That is very, very clear. They want to get that monthly price and know it's good."
Learning along the way
Volvo has learned a lot about the new car subscription model since launching it with the XC40 crossover earlier this year. Namely, that more cars need to be allocated for the subscribers. With XC40, the entire Care by Volvo allotment sold out in just four months.
"If you order a Care by Volvo XC40 today, you're going to get your car next year," Gustafsson said.
The US-built 2019 S60 sedan will be the second car to be available through Care by Volvo, and Gustafsson says the company will have "absolutely no problem with that one," referring to handling subscriber demand. "The next wave will be much, much smoother."
There have been plenty of other issues, too. Early on, a number of customers complained about long wait times to actually receive their vehicles.
"The process was very, very stretched." Gustafsson admits. "We have learned that the process needs to be smoother, and also the process related to insurance and all the rules in all the states in this beautiful country ... we have learned a lot.
What Volvo is really interested to see is how the addition of S60 will change the Care by Volvo space. Gustafsson wonders "how much the car is pushing Care by Volvo, or how much Care by Volvo is pushing the car" -- as in, is it the ease and convenience that are driving people to this service, or is it the actual product itself?
"I really hope we're going to get the same numbers," Gustafsson said regarding the new S60.
Of course, there's still a lot more to learn. And indeed, Gustafsson admits the company is "far away from where we would like to be."
"What really sticks out ... is that 50 percent of all the orders related to Care by Volvo were ordered through the phone," Gustafsson said. And by phone, he means the mobile app. "The mobile is getting so important for us in this process."
"When we launched Care by Volvo related to XC40 ... there was no way we could calculate that we'd be sold out after four months," Gustafsson said. "It's learning for us. Sometimes it's super good to be shocked."
For more information on Care By Volvo and other automaker subscription programs, be sure to check out Roadshow's primer: