​Volvo CEO Determined to Shake Up Vehicle Ownership Model

Date: May 15, 2019
Source: Automotive News
GOTHENBURG -- Volvo CEO Hakan Samuelsson believes the industry needs to change the way it brings its products to customers. That is why the automaker debuted its Care by Volvo subscription service in 2017 and last year its stand-alone Volvo Car Mobility unit launched M, a new brand that will expand the company’s global mobility operations.
 
Volvo Car Mobility’s mission is to deliver an alternative to car ownership for urban and metro consumers while Care by Volvo provides customers use of a model such as the XC40 compact crossover, including insurance and maintenance, all for one monthly payment.
 
Although Volvo believes these services provide a big benefit, not everyone agrees. U.S. dealers in California have called Care by Volvo illegal and filed a petition to the state’s department of motor vehicles to block it. According to Volvo, neither Care by Volvo nor M is facing any legal challenges from dealers in Europe.
 
Samuelsson said services such as Care by Volvo won’t work without support from the automaker’s retailers. “There is a very big misconception that the dealers are going to be told, ‘You guys can drop dead. We don’t need you anymore.’ That is absolutely wrong,” Samuelsson told Automotive News Europe. “In this new world we need them even more.”
 
Samuelsson believes that dealers that embrace Care by Volvo will extend their connection to the car and its owner for a much longer period than today.
 
“It’s wrong to just cash-in on day one and then have a two-year warranty and then someone else takes over,” Samuelsson said. “The dealer gets less and less service and sells fewer and fewer parts that way. We need to look at the profitability of the car over eight years or longer.”
 
He mentioned that length of time because it is expected that vehicles will remain in the Care by Volvo program for that amount of time.
 
Direct Business Relationships
 
Samuelsson feels so strongly about the need to adapt the car ownership model that Volvo in March created a position on its top management board specifically focused on developing direct business relationships with consumers.
 
Last year Volvo said its aim is to build more than 5 million direct consumer relationships by 2025. To reach this goal Samuelsson put Lex Kerssemakers in charge of the new post because the longtime Volvo executive has experience working with the automaker’s retailers in Europe and the United States.
 
“I think convincing them [dealers] and bringing them on board, making them motivated about this new world requires somebody who understands how the system works,” Samuelsson said on the sidelines of a Volvo event in late March. “That’s why I think Lex is the right guy to do that. He can go to the dealers and say, ‘This is how it will work and this is your part of it. It’s good business because you will get a bigger share of the pie’.”
 
The CEO added that the new job also gives Kerssemakers “a chance to really create something new. I think he’s very motivated to do that -- and he has the experience to do it.”
 
When asked about the new job Kerssemakers told Automotive News Europe: “One of my tasks will be to reduce the nervousness. Our retail partners are wondering what the future will bring.”
 
His goal is to find the right mix of old and new ideas to lure customers – and keep them. “The good thing is that I’m coming in from the existing world,” Kerssemakers said. “I’m trying to bring the two worlds together in such a way that we don’t let go of the current system but we are also very open-minded as an organization about the new system.”
 
When asked how he’ll try to convince reluctant retailers to adapt, he said the key will be providing them with tangible results that Volvo’s ideas work.
 
“I believe in this,” Kerssemakers said, “and I want this to succeed because this is how the world will look in the next 10 to 15 years.”
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