Currently reading: Analysis: How Volvo's subscription model is channelling Netflix
Subscription-based car use is a hot growth area – and the Swedish brand wants in on the action
James Attwood, digital editor
News
4 mins read
14 September 2020

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 across the UK, giving customers rapid access to new cars from £559 a month with no deposit and no contract.

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.”

Advertisement
Advertisement

Find an Autocar review

Read our review

Car review
Volvo XC40

Volvo’s XC40 arrives in the crowded premium compact SUV segment and hits the right note with design, practicality and driving style

Back to top

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.”

Back to top

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.

READ MORE

Volvo launches new car subscription service in UK

Volvo targets 33% autonomous sales and 50% subscription sales by 2025

Volvo XC40 diesel models pulled from sale

Join the debate

Comments
3

14 September 2020

From 20 percent to 10 percent at best. The young people want a different way, just how many young people can afford 560 pound a month minimum and even then they have to pay to insure it, you can buy a decent car for 4 months rental.

Over rated car rental scheme with verry limited appeal at best and to compare it to netflix is a joke 

14 September 2020

for a basic XC40 is pretty much daylight robbery.

Unless someone can bring the subscription to the 2-300 a month range this will never replace PCP.

I'm sure it wont be long before Ruppert is doing an article on what great cars you can buy outright for just one months subscription to rubbish schemes like this.

The JLR scheme has been running a while now and how many people are on it? Not many, if any I would bet.

All these schemes are more about reducing manufacturer discounting than being a realistic alternative to a dealer site.

 

14 September 2020

It a lot of money - but the reality is you can't find an XC40 anywhere near £2-300 per month with no deposit, with maintenance/ tyres included, and no long tie in to a contract.I can see how this could work for some. Not for me personally, but an interesting commercial proposition. 

Add your comment

Log in or register to post comments

Find an Autocar car review