Volvo dealers on edge over automaker’s digital role

A growing number of automakers have declared that the electric-vehicle revolution is coming, and rapidly. But what is the role of dealers in this future as EVs hold the promise of lower
maintenance and automakers seem intent on selling vehicles directly to consumers?

That trend, which first gained traction with the launch of Tesla, received its biggest push to date in early March when Volvo in Sweden announced plans to go all-electric by 2030 and sell those vehicles online only. John Martins, who owns dealerships in Oakville and Hamilton, Ont., and is on Volvo Canada’s Retailer Advisory Board, has fielded many calls for his insider perspective from concerned dealers in the network.

“Certainly, when there is change people get concerned,” said Martins, who also sits on the automaker’s North American Product Advisory Group.

Volvo Car Canada was quick to reassure its dealer network that its online-only push will be modified for the Canadian market: Yes, customers can order the new C40 Recharge online later this year, but they can also do so at their local dealership.

“They are not going away, the dealers are very much a pillar, an integral part of our ecosystem, and we need them to deliver cars, sell cars, handle the customer, maintain them and take care of them,” said Matt Girgis, managing director of Volvo Car Canada.

When asked whether dealers were on board with the online-only sales model, Girgis said, “there’s varying degrees of sentiment across the country, but generally speaking they are aligned that there’s a need to improve the overall customer journey.”

He said Volvo is building a system aimed at providing a “personalized, transparent, convenient customer experience online.”

The online-only, no-haggle sales shift, which has sparked a lawsuit from California Volvo dealers against the automaker, comes at critical moment for the relationship between the company and its dealers north of the border. The two sides are currently hammering out a new franchise agreement, its first in 15 years, that will need to include controversial additions such as online retailing and the control of customer information.


“Clearly, Volvo is sort of at the forefront of trying that [online] model,” said Samir Akhavan, managing partner of Templeton Marsh, a Toronto-based dealership buy-sell company.

Akhavan said the industry’s shift to more EVs will also negatively affect a dealer’s revenue and dealership valuations. EVs, he said, have fewer moving parts and are expected to have lower maintenance requirements than gasoline-powered vehicles, meaning less upkeep and repairs and fewer visits to dealerships.

The electric effect is already here, he said. He cited the example of a dealership in a major Canadian city that recently opened a 70,000-square-foot (6,500-square-metre) facility, followed a few days later by an announcement from the automaker that it is going all-electric by 2025.

“This guy just lost 30 per cent of his service business,” said Akhavan, who declined to name the dealer or the automaker.


The move to EVs and a retailing model that reduces or eliminates the role of dealers appears to be gaining momentum. U.S. niche player Tesla was the trailblazer for the luxury EV, no-haggle pricing model that Volvo is looking to emulate. Volvo’s Polestar luxury brand will use a limited number of small boutique showrooms.

Other emerging EV makers, such as Michiganbased truck maker Rivian and luxury-focused Lucid Motors, headquartered in California, have attracted lawsuits recently from U.S. dealer groups over their direct to-consumer sales models.

Unlike Canada, many U.S. jurisdictions have franchise laws requiring that new cars be sold only by independent dealers.

“The U.S. is much more litigious, they have stronger franchise rights, and we don’t have that here,” said Robert McMillan a second-generation owner of a Volvo dealership in Mississauga, Ont.

He said the online shift is “very concerning to the dealer body,” and sees the good and the bad from the company.

“Volvo is doing a lot of things right. They are making the best cars they have ever made. Cars that consumers want. They are ahead of the game in technology.”

He takes issue with Volvo’s online push — which creates profit and revenue uncertainty — as well as the launch of the Polestar EV that cuts out dealers.

“They have alienated in Canada, I think we are [36] dealers. In the States they have alienated over [280] dealers.”

Mass selling of vehicles directly by an automaker would be complicated and difficult, said Martins, who is part of the dealer team working on the new franchise agreement with Volvo. He does not believe the automaker wants to assume the dealer role in North America.

“Don’t forget, we have to sell cars for them. So, if our sales go into the tank because the customers don’t want to do it this way, then we have to switch gears and have another plan.”

Tim Reuss, CEO of the Canadian Automobile Dealers Association, said he does not think the shift to digital auto sales should be viewed as “a dealer-versus-factory” development.

“The move to online has been going on for quite some time, on sales, and quite frankly a lot of dealers have been at the forefront of that, of digitalizing a lot of the sales processes and so this is not something new or something overnight.”

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