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California New Car Dealers File Petition Against Volvo Car USA

Contact: Jenny Dudikoff
Phone: 916-441-2599

SACRAMENTO, CA – The California New Car Dealers Association (CNCDA), representing more than 1,200 new car dealers statewide, has filed a petition with California’s New Motor Vehicle Board, against Volvo Car USA.

The petition, which was filed today, has been filed under the provisions of the California Vehicle Code (VC) and claims that Volvo, as a licensee of the Department of Motor Vehicles (DMV), has violated the California VC and violated California motor vehicle franchise laws.

In 2017 Volvo introduced a “subscription model” called Care by Volvo (CbV), aimed at getting consumers to subscribe to their cars, not buy them. This “subscription” model offers customers with an “all-inclusive” two-year lease with a fixed, standardized, pre-determined monthly charge including cost of the vehicle, insurance, maintenance, road hazard protection and normal wear and tear and is available for two Volvo models – the XC40 and the S60. Both models are also sold and leased by Volvo dealers directly to consumers outside of the CbV program.

While a clever marketing scheme, this is illegal and violates several provisions in the California VC, each of which constitutes a separate ground for disciplinary action against Volvo’s DMV license under the VC. As outlined in the petition, CNCDA asserts that the CbV program violates the California VC, specifically four sections aimed at protecting franchisees and consumers. Violations include:

  1. Care by Volvo Creates Competition Between Manufacturer and Dealers
    1. CbV diverts customers away from dealers to Volvo with the ultimate goal of bypassing the franchise model entirely.
    2. Such business practices are prohibited under California law and undermine the fundamental purpose of California’s robust new motor vehicle regulatory system.
  1. Volvo’s Failure to Give Written Notice to Franchisees and the Board About CbV
    1. The VC prohibits franchisors such as Volvo from making franchise changes that would “substantially affect the franchisee’s sales or service obligations or investment” absent 60 days’ written notice to the affected dealers and to the NMVB.
    2. CbV is a franchise modification as it fundamentally alters the way dealers sell and requires a notice to the franchisee and to the NMVB. 
  1. The CbV Program Preferentially Allocates Vehicles and Refers Sales to Dealerships Controlled in Part by Volvo
    1. California auto manufacturers are prohibited from giving preferential treatment to dealerships controlled by them in whole or in part.
    2. Volvo assigns a share of certain highly-desirable, limited supply vehicles to CbV dealers to the exclusion of non-CbV dealers who are not controlled by Volvo.
  1. The Care by Volvo Program Undermines the Purpose of Prohibiting Payment Packing
    1. CbV’s flat monthly rate conceals the actual cost of the CbV vehicle and the bundled services and fails to disclose that the costs will vary between CbV subscribers.
    2. California law mandates that dealers disclose, prior to contract drafting, all charges for goods and services to be added to a contract for the sale of a vehicle. Volvo seeks to escape this restriction by requiring dealers to perform its DMV paperwork.

“We firmly believe that Care by Volvo violates a number of laws that have been enacted to protect dealers from complete control by manufacturers. We are not against subscription-based models, but we are against violating the law. There is a right way and a wrong way to do business in California, this is the wrong way. We feel that Care by Volvo interferes with the role of dealers in violation of both the Vehicle Code and the spirit of the California franchise system,” stated Brian Maas president of the California New Car Dealers Association. “Consumers are also negatively impacted by the way the program is bundled and priced, which also violates California’s anti-payment packing statute.”

CNCDA has requested that the NMVB provide relief by directing DMV to conduct an investigation of the matters claimed by CNCDA. CNCDA further asks the review to be completed within 90 days of the date of the NMVB’s order that the DMV investigate. Alternatively, CNCDA requests the NMVB order the DMV to initiate disciplinary proceedings to penalize Volvo or take other steps as necessary to stop CbV.

For more information and details of the petition, please click here.

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About CNCDA

For more than 95 years, CNCDA has represented the interests of California’s franchised new car dealers.  CNCDA members are primarily engaged in the retail sale and lease of new and used motor vehicles, but also provide customers with automotive products, parts, service and repair.  Our members sold more than 2 million new cars and trucks in 2017 and employ more than 140,000 Californians, significantly contributing to our state’s economy.  As the nation’s largest state association of franchised new car and truck dealers—with nearly 1,200 members—CNCDA serves its members by providing legal compliance and legislative, regulatory and legal advocacy.

CNCDA is working to continuously provide our members with the most up to date information on the coronavirus as it pertains to dealerships.

Visit our Dealership Coronavirus Resources webpage for more information.

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