Volvo subscription service to launch next year

IN WHAT is expected to be a first for an automotive brand in Australia, Volvo will challenge traditional car ownership next year when it launches its ‘Care by Volvo’ subscription service that gives users access to one or more of its models over what is currently a two-year term.

 

Speaking to journalists this week at the S60 national media launch in South Australia’s Barossa Valley, Volvo Car Australia (VCA) managing director Nick Connor said Care by Volvo “is something we’re working on”, with a launch planned for 2020, although exact timing is yet to be locked in.

 

“Whether we’ll be the first (brand to offer a subscription service), I don’t know, but certainly our intention is to launch next year,” he said.

 

“We may start with one model and roll it out, but the objective is to offer it on everything. Maybe just to test the market and test out systems and processes, we may limit it to one or two cars initially, but the intention is it’s a broad-spectrum offer.”

 

Mr Connor added that VCA is yet to select the models with which it will launch Care by Volvo, although it appears its entry-level offering, the popular XC40 small SUV, would be a likely starter.

 

“The tricky bit is the mechanics of the offer and getting the right suppliers to support it, getting the right front end, the right back end – and that’s a work in progress,” he said.

 

“We’re literally in the process of talking to potential suppliers now, talking to people that work for us in Europe that do it. There’s a global project team working on Care by Volvo who are supporting us in that, so we’re working with them to put it in place.”

 

Care by Volvo is currently offered in Europe and the United States, where users sign up to a telecommunications-style two-year contract with set monthly payments that cover insurance, servicing, maintenance and repair costs, and so on.

 

After the first 12 months, users have the option of swapping their vehicle for another one for the remaining year of their contract. Additionally, one short-term swap is allowed annually.

 

Mr Connor reiterated that the specifics of the Australian version of Care by Volvo are yet to be locked in, especially how often users will be able to swap vehicles, given the costs and complexities involved.

 

“The ultimate idea is it’s virtually month-by-month,” he said. “At the moment, I don’t believe we’ve got below two years anywhere, just because of the complexities of the depreciation model.

 

“Where we’ll start here, I don’t know. If we can get to one year as a minimum term, to start here, I’ll be really happy with that. I think over time, we can develop it.

 

“Going the economics route, to de-fleet a car after one month and then recycle it is time-consuming and expensive. So, it’s an expensive business model if you give complete flexibility, but you’ve got to have a broad spread of numbers to try and balance it out.”

 

Asked why customers would opt for Care by Volvo over traditional ownership models like financing and leasing, Mr Connor explained that “the attraction would be flexibility – the ability to dip in, dip out, switch models as and when you need to”.

 

“If someone’s going away for a three-month holiday to Europe and they give the car back in month nine, they come back in month 12 and they take it at the end of month 12. They haven’t made the payments for three months. They haven’t paid for parking,” he said.

 

“It’s not going to be for everyone. It’s going to be premium price because it costs to create that degree of flexibility.

 

“I think for that right sort of customer who maybe sometimes lives in the city, they want a small city car – an XC40, say – and they’ve got a farm (in the country) and if they want to spend six months (there), they can swap into an alternative vehicle.

 

“It’s for those people who just have that (situation). Rather than keeping two cars, you have one subscription and you flex between the cars that are available.

 

“It’s people who are frankly prepared to pay a little bit more for a lot more flexibility.”

 

Mr Connor expects that Care by Volvo will be popular among its customers, across all demographics, while the same will become true of automotive subscription services more broadly.

 

“People don’t want to lock themselves in necessarily for three- or four-year finance terms, so I think it will follow,” he said.

 

“I think the differentiators will be just the degree of flexibility and any sort of soft offers that are packaged around it.”