Volvo has said that its future is electric — an all-EV lineup by 2030, to be precise — and that it plans to sell those EVs online, adopting a digital sales model. That sounds like quite the leap, given that Volvo has but one fully electric model right now, the XC40, with the C40 in the pipeline. And, oh, the company wants to set the prices as well.
Naturally, established Volvo dealers see all this as a mortal threat to their franchises. And not a distant threat: Volvo is already gaining some experience with online sales through its Polestar startup, so the groundwork is underway.
Volvo dealers have been scrambling to figure out exactly what the automaker’s plans are, as the company’s announcement of its intentions earlier this month seems to conflict with what Volvo USA CEO Anders Gustafsson is saying.
Dealer associations in California and Virginia have made their position known in a letter to the company, essentially saying that Volvo’s online sales plans are a threat to the franchise dealer system. Notice how the letter disparagingly calls Volvo’s plan a scheme:
“Volvo’s proposed scheme violates its retailer agreement with dealers,” the Virginia Automobile Dealers Association said in a March 22 letter to Volvo Car USA CEO Anders Gustafsson. The Volvo retailer agreement … does not contemplate anything like the scheme attributed to Volvo officials where vehicles are sold online by the U.S. distributor at a price set by the distributor.”
Gustafsson is set to make his case to dealers in April with a round of meetings to discuss the plans. He sees the adverse reactions by the dealers as confusion:
“It’s very clear that [there are] some misunderstandings out there. I have still a tough time to understand why everyone is so suspicious. We are trying to develop this brand faster than our competitors.”
In a nod to trying to placate dealers, who regard this as a threat to brick-and-mortar dealerships, Gustafsson says that the online sales model will be a shopping and research tool for the customer. Dealers aren’t buying it, though, saying what they have been told them conflicts with the plans. The owner of a Volvo dealer in Memphis, Tennessee, says that Sweden is selling the plan to dealers as a partnership, but “the implication from Sweden is that dealerships will become distribution and service centers.”
In fact, Volvo has outlined its plan clearly for both dealers and the public. Electric models will be available online only. Buyers will be able to choose from models already configured with packages of popular options and are ready to be delivered. This will be combined with packages that are similar to what the company offers in its Care subscription with service, warranties, roadside assistance, home charging and insurance bundled together.
Volvo acknowledges that dealers will still be a part of the business — they will “continue to be responsible for a variety of important services such as selling, preparing, delivering and servicing cars.”
Whatever the case may be, dealers won’t let this go. They see it as a call for the end of the franchise dealership system; direct-to-consumer sales would effectively gut dealerships.
This may be a fight that Volvo can’t win. The only company that has been largely successful in this battle against franchised dealers has been Tesla. Why? There were never Tesla dealerships to mount a pushback. Since it began selling cars, Tesla controlled its sales process with customers buying the vehicles directly from the company, either in their locations or online. Dealer associations representing other brands tried to overturn Tesla’s direct-sales model — with notable success in some states — but Tesla is still selling all the cars it can build.
Still, lobbyists for the dealer associations wield a lot of power; they’ve already convinced the California DMV to force Volvo to stop its Care by Volvo subscription program in the state. With a long-established dealer network raising objections, Volvo’s online sales plan may be stopped before it ever gets started.