By Anthony Bento, Director of Legal and Regulatory Affairs
As you may know, in January 2019, CNCDA filed a petition at the New Motor Vehicle Board (NMVB) against Volvo, which alleged that Care by Volvo (its vehicle “subscription” program) violated California law. Our principal concern with Care by Volvo was (and still is) that Volvo is attempting to use the program to illegally compete against its dealers. Volvo offers its most popular vehicles via two-year lease bundled with insurance, maintenance, and wear and tear coverage through the program. The bundle is offered at a price that substantially undercuts dealer lease offerings.
To add insult to injury, dealers were coerced into acting as delivery agents for vehicles sold by Volvo through Care by Volvo. Dealers had no opportunity to apply trade-ins to the vehicle’s price and could not include optional products.
Following the filing of CNCDA’s petition against Volvo, I spoke at the National Association of Dealer Counsel (NADC)’s April 2019 conference about the danger Care by Volvo represents to our industry. At the April 2019 conference, several attendees were convinced that vehicle subscription programs were a fad and that they were already fading. I argued that some manufacturers (including Volvo) were using subscription programs as a justification to compete directly with their franchisees.
In the months following my presentation at the NADC conference, concerns about Care by Volvo receded from the front of my mind. They were replaced by more pressing matters, such as daily COVID compliance alerts. And in April 2020, the DMV ended its investigation into Care by Volvo (ordered by the NMVB due to our petition). The DMV concluded that Volvo was illegally competing with its dealers through the Care by Volvo program. Throughout the process, Volvo repeatedly accused us of overreacting and harming the interests of California Volvo dealers. But after the DMV found that Volvo was violating California law, it publicly committed to indefinitely suspend Care by Volvo in California.
Our Volvo petition’s outcome was a victory for California dealers, but it increasingly appears that Volvo’s corporate bigwigs could not care less about the DMV or California law. Less than one year after the issuance of the DMV’s findings that Volvo was illegally competing against its dealers by directly retailing vehicles through Care by Volvo,
Our Volvo petition’s outcome was a victory for California dealers, but it increasingly appears that Volvo’s corporate bigwigs could not care less about the DMV or California law. Less than one year after the issuance of the DMV’s findings that Volvo was illegally competing against its dealers by directly retailing vehicles through Care by Volvo, Volvo issued several major press releases proudly announcing that it intended to sell electric vehicles exclusively online from Volvo’s website. It even mentioned the integration of Care by Volvo into this direct distribution model.
When a dealer signs a franchise agreement and invests millions in facilities and personnel, the dealer does so with a justifiable assumption that he or she is partnering with the manufacturer as an independent dealer, not as the manufacturer’s delivery agent. Volvo’s actions undermine this basic assumption and set an extremely dangerous precedent for our industry.
In the coming weeks and months, CNCDA will continue to evaluate Volvo’s plans to retail electric vehicles. Admittedly, there is a lot we do not know currently. But CNCDA will continue to vigorously defend California’s franchise laws.
