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Volvo Launches Car Subscription Service

2018-12-17 09:26 Monday

In Germany, Volvo initiated a campaign trying to persuade consumers to not purchase but subscribe to its vehicles, with advertisements proclaiming: "Don't buy this car. Subscribe to it." Of all carmakers that have experimented with subscriptions, Volvo is perhaps the most prominent to put it into practice.

car subscription service

After limited trial runs in the U.S. and Europe over the past year, Volvo introduced a national program in Germany, with subscriptions to virtually all of its models. Volvo contends that its subscription differ from traditional leases in that there's no down payment, and the price includes insurance, taxes, roadside assistance, and services such as home pickup, as well as  mounting and storage of winter tires.

Volvo offers its subscription service for as little as €498 a month for the new XC40. However, for German customers seeking a mid-size luxury SUV, a new XC90 will cost €929 per month, roughly 40% more expensive for a lease of the same model. Only a minority of German consumers have indicated that they're actually willing to subscribe to a vehicle. In the United States, just 14% of consumers opt for automotive subscriptions, according to a recent survey.

Customers pay a single monthly bill that covers various fees and repairs—a plan that Volvo expects to account for half of its output by 2025. "It's very transparent, a hassle-free way of having a car, you know exactly what it costs." says Volvo Chief Executive Officer Hakan Samuelsson.

The Volvo initiative is a prominent example of carmakers' efforts to stay relevant with young consumers, who are receptive to ride-hailing, car-sharing, and self-driving vehicles. In Britain, only 30% of 17 to 20-year-olds have a driver's license. Volvo notes that in the U.S. subscription trial run, drivers were an average age of 40, a decade lower than the brand's overall customer profile. "The car isn't as important to young people as it was in the 1980s or '90s," said Samuelsson. "Subscribing to a car is a convenient way to have one without the financial risk."

Volvo isn't alone in trying subscriptions. Ford Motor Co. offers cars in San Francisco and Los Angeles starting at $405 monthly before taxes. Porsche, Mercedes-Benz, and Cadillac all let drivers in select cities subscribe high-end models multiple times a year for roughly $1,000 to $2,000 per month.

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