Volvo Announces Intent to Sell Direct to Customers
Under the guise of providing convenience to customers, Volvo has recently announced that it intends to offer retail customers the option of purchasing vehicles directly from Volvo at a non-negotiable, fixed price. Interaction with the retail customer has traditionally been solely within the realm of the franchised dealer and is indeed what the franchised dealer bargained for in exchange for the tremendous investment made in facilities, marketing and personnel. Volvo’s plan puts dealers’ investment at risk and is totally unnecessary.
Franchised dealers have proven through the COVID-19 pandemic that they are more than capable of selling vehicles online to their customers with the vehicle being delivered to the customer’s doorstep. With that understanding, Volvo’s plans can only be interpreted as an effort to cut dealers out of the retail transaction and the front-end profits which go along with the sale of a new vehicle.
The concept of a non-negotiable, fixed price being offered by the OEM while the dealers are selling those same vehicles at market-based prices will, at a minimum, cause confusion and frustration for customers. In theory, Volvo’s price might be lower than a dealer’s market will dictate while in other circumstances the dealer’s price could be lower. And, what happens to the other components of a dealer’s front-end profit – finance and insurance products as well as vehicle trade-ins?
Volvo’s proposal to negotiate the sale of a new vehicle directly with the retail customer is contrary to the franchise laws in some states. Several state and metro dealer associations have written to Volvo on behalf of their dealers objecting to Volvo’s plans. NADA is also reviewing the issue to determine next steps. Volvo dealers may want to consider where they intend to draw the line on the OEM involving themselves in the franchised dealer’s business.