Subscription-based car use is a hot growth area – and the Swedish brand wants in on the action.
The growth in online services has sparked a huge rise in subscription-based business, in areas as diverse as television (Netflix), music (Spotify) and even magazines (Readly). Now Volvo, along with other car firms, believes that this business model is set to change the way people access cars.
After running a number of trials, the Swedish firm recently rolled out its Care by Volvo subscription service in Europe.
Volvo believes the subscription model – which is also being adopted by related firms Polestar and Geely – will be part of a wider online revolution in car sales. Magnus Fredin, Volvo’s global head of online business, spoke to Autocar about Care by Volvo and how the industry is moving online.
Why the full launch of Care by Volvo as a subscription service now?
“Coming from the retail world, it’s clear the move from offline to online is going to happen, period. For Volvo, that’s a great opportunity. A core of online is that you need to reduce the friction, and to do that you need to lower the commitment.
“There are customers who don’t see the need for a test drive or to visit a retailer, and you need something that works for them – but they should be able to have the same experience, so integrated into our model are retailers to build the relationship at that end, which will drive retention.”
Given the relatively high monthly subscription payments, is the appeal of Care by Volvo convenience over cost?
“We are not striving to be the cheapest option in the market. We strive to put value in our products and we’re looking into how we can work with the convenience and flexibility. There are customers who don’t want to go and negotiate deals in the way people used to – but this is still good value for money.”
The younger generation are now used to subscription services, with online streaming. Is there a generational change in terms of people no longer wanting to buy things?
“It’s clear the younger generation don’t need to own things and they’ve been raised with that approach, driven by the technology we have now.
“But you can’t say the subscription model will work for all. But at the stage we are now in the automotive industry and Volvo specifically, we’re going all in to make the move online – and this is a first step. Eventually, we’ll need to come up with other ways to access a car that works well for online and Care by Volvo can guide that.”
Volvo boss Håkan Samuelsson said the target was for subscriptions to account for 20% of cars sold by 2022. Is that still realistic?
“I don’t want to speculate. The first milestone we’ve set is to reach 10% of new cars and that’s a realistic goal within a reasonable time frame. We have high ambitions going forward.”
How is the growth of online changing the approach of a car firm such as Volvo?
“We’re coming from a tradition of wholesaling cars. Now it’s just as important what happens when you’re in a subscription, so it’s about how we’re working with customers on things like car maintenance, and the convenience of that. All of those processes are a change for us.”
Is it hard to find a balance between online and traditional car sales?
“It’s not Volvo driving the change. It’s the online world and technology. Whatever we do is going to happen anyway, so we’re trying to be at the forefront of it.
“For us competing in the online world, our omni-channel offer is key, so it’s about ensuring there are local partners customers can go to if they have a problem. The sales process may change, but retaining customers is truly important.”
You’ve come into Volvo from outside the car industry, with a background in online. Have you found the industry prepared to adapt?
“Some Volvo retailers have been moving into online on their own, but if they all did that, it would be fragmented. That’s where we come into the picture, to make sure it’s done in a joined-up way, protecting the business model and the whole Volvo brand.
“When you look at retail ecommerce, two players – Amazon and Alibaba – have 40% of all online trade. I’m not saying that would be the case [in the car industry] but you might see a reasonable development in that direction if we don’t make sure we meet customer expectations.
“The willingness to do that in Volvo is very high and we need to make sure everybody knows this is something we’re trying to do together – and not just something that benefits Volvo.”
How Volvo’s subscription service works
Care by Volvo is offered on the firm’s full range of UK cars, with no deposit but monthly payments starting from £559 for an entry-level XC40 T3 Momentum. The payment includes the car, scheduled servicing, maintenance (including replacement tyres), roadside assistance, tax and 10GB of in-car wi-fi. Insurance can be added as an extra.
New customers get a 30-day trial and pre-specced cars can be delivered within 30 days of ordering. Customers can give three months’ notice to switch cars or cancel their subscription.
Manufacturer-run subscription services are relatively new to the UK market.
Jaguar Land Rover also offers a scheme, called Pivotal, which gives customers access to a range of vehicles and starts from £750 a month.