In its march toward digitalization, Volvo also is altering how dealers source inventory. Volvo will maintain a central stock, delivering customer-ordered vehicles to dealerships rather than having retailers order and carry the inventory on their floorplan.
Retailers “are going to have cars outside their dealership, but it will be on our books,” Gustafsson said.
“We are taking a bigger responsibility from the planning point of view. We need to have by far higher demand; we need to have state-of-the-art marketing.”
Volvo seeks to move away from the “push mentality” in auto retailing, where dealers resort to discounting to move vehicles sitting on their lots.
“The culture of how we have sold cars historically is related to how many cars you have outside your dealership,” Gustafsson said. “That is kind of producing an unhealthy focus.”
Some Volvo dealers fear that not having a lot full of new cars would put them at a competitive disadvantage. And they are skeptical that Americans would be willing to wait several days for delivery.
Consumers want breadth and depth in vehicle selection — and they want it now, Simms said.
“It’s going to be hard when the Toyota dealer down the street is sitting there with 400 cars while the Volvo dealer is sitting there with one car,” Simms said.
Gustafsson declined to say how long it would take to fill digital orders. “It depends on [consumer] interest and our production capacity,” he said. “It’s going to be tougher on new models because everyone would like to have the latest and the greatest.”
To reduce complexity and speed deliveries, Volvo will limit the number of variants and packages offered on its BEV models.
“We have 1.6 million different versions in our product portfolio, and that is not smart,” Gustafsson said.
“It’s very, very complicated for the manufacturing structure [and expensive for dealers]. We need to … make sure we have the most beautiful cars in our portfolio with the specifications that customers are asking for.”
And to allay consumer concerns about the reliability of EV technology, Volvo will include service, warranty work and roadside assistance for the first three years.
“This is an offer structure that is going to be extremely convenient for the consumer,” Gustafsson said, while guaranteeing dealers service and warranty revenue.
Even so, dealers have a lot of questions about profitability in the new business model.
“Will the margin compensation for BEVs be the same” as on internal combustion engine models? Norcross asked. “We are currently having that conversation.”
