Volvo pulls the plug on car subscription service

Volvo quietly suspended its car subscription service, Care by Volvo, on Aug.1 in the U.S. to focus on its core business and improve its overall efficiency.

Why it matters: Car subscriptions, once heralded as the future of ownership, have proven challenging for automakers. The complexities of insurance, maintenance, depreciation, and intermediary costs make it difficult to offer at attractive rates compared to leasing or buying.

Flashback: Launched in 2017, the program offered a bundled monthly fee covering vehicle use, insurance, maintenance, and other services — designed to attract younger, more flexible buyers.

High points: More than 80% of the subscribers to Care by Volvo were new to the brand, according to Automotive News.  

• Dealers received a portion of the subscription service revenue, the same as new vehicle sales and leases.

• The program provided dealerships with a pipeline to lower-mileage, certified Volvo vehicles.

• The subscription service was deemed profitable in the U.S. by 2020 (according to Volvo), roughly three years after launch.     

Early issues: Care by Volvo was initially criticized by dealers for violating state franchising laws. 

• In 2020, the California Department of Motor Vehicles sided with dealers, finding that Volvo failed to notify dealers about changes related to the service and unfairly allocated subscription services to some stores over others. 

• As part of its investigation, California’s Motor Vehicles Department also found that Volvo did not meet the required standards for lease disclosures to subscription owners.

Trending: Volvo joins Audi, Mercedes-Benz, Ford, and Cadillac, which have all shut down similar programs in recent years. Automakers are finding it hard to reconcile the manufacturing model with a subscription approach that involves multiple layers of cost and logistics.

Bottom line: While Volvo is paused on subscriptions "for the foreseeable future," the automaker has not completely ruled out a potential return if market conditions change. But for now, Volvo and others are leaving their programs in the rearview mirror in what may end up being a short-lived experiment in automotive history.

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