What is it? “Care by Volvo” is a subscription programme started by car manufacturer Volvo. Customers can get a Volvo car with insurance coverage and maintenance for a monthly payment. The programme requires no long term commitments and has cancellation flexibility. The programme is currently available in Sweden, Norway, Germany, Poland, Canada, UK, Spain, Italy and the US (Volvo, 2018).
Why is this important? The Ellen MacArthur Foundation estimates that most cars stand idle (i.e., not driven) 92% of the time (EMF, 2015). Further, they often only transport 1.5 people on average at a time although they are made to carry 4-5 people (EMF, 2015). Leasing models, where multiple owners could theoretically share one vehicle over a period of time present a unique opportunity to optimize resource usage (Tukker, 2004). Subscription based business models by manufacturers can also ensure that cars receive the best quality of maintenance, which can keep the vehicle in good running condition for longer (Tukker, 2015).
Main resource strategy: Slowing the loop by providing cars as a subscription and ensuring that the vehicles have a long service life.
Business model aspects: “Care by Volvo” is a leasing/subscription based programme presenting an alternative to car ownership.
- Value Proposition: Mobility as a subscription-based service, with all-inclusive insurance coverage and factory maintenance.
- Value Creation & Delivery: Customers can select and order their customized vehicle online through the Volvo website (Volvo, 2021a). They receive a notification when the car is available for pickup at their nearest car dealership. Customers can cancel contracts after a period of 4 months. The monthly subscription includes the following benefits: 1,250 miles/month, insurance coverage, factory scheduled maintenance, excess wear protection, winter tires, and road hazard tire and wheel protection (Volvo, 2018, 2021b). Customers also have access to 24/7 customer care and roadside assistance in case they run into any issues with the vehicle.
- Value Capture: According to Volvo, most other car subscription models require a 36-month commitment from members (Volvo, 2021b). “Care by Volvo” offers a shorter 24-month subscription, and gives customers the chance to cancel their subscription after a 4-month period. Customers also have the ability to change the type of vehicle at any point during the subscription, and can purchase the vehicle at any point as well (Volvo, 2021b).
Business model experimentation practices: Volvo has had a car sharing offer called Sunfleet, in its Swedish markets for 15 years now (Sunfleet, 2021). The Care by Volvo scheme was partly inspired by this earlier experience, and is now being molded to replace the company’s primary business offering in the future (Attwood, 2020b). In the initial pilots, Volvo also trialled the ability for subscribers to swap car models for a short period, and borrow a larger car for a family holiday for example. However, the option was dropped from the current version of the scheme due to limited demand (Attwood, 2020b).
Tools, methods and approaches used: In some markets, new customers are offered a 30-day trial, with no deposit needed (Attwood, 2020b). In certain markets, new customers have the option to change or return a new subscription at any point after the first four months (Automotive World, 2020). In the US, the scheme has been expanded to include all vehicles in retail stock. That is, customers can choose to finance, lease or subscribe to any car they see at a Volvo retailer, and take it home the same day (Volvo Car USA, 2020). This can help reduce the commitment from the side of the customer, and increase willingness to participate in the scheme.
Sustainability outcomes: The subscription model for cars is now also being adopted by other firms, and could further accelerate the uptake of new service business models in the industry, through healthy competition (Attwood, 2020a). However, since the business model has been launched only recently, there is no measurement of potential environmental savings yet.
Sources:
Attwood, J. (2020a). Analysis: How Volvo’s subscription model is channeling Netflix. AUTOCAR. Accessed 03 February 2021 at: https://www.autocar.co.uk/car-news/industry/analysis-how-volvos-subscription-model-channelling-netflix
Attwood, J. (2020b). Volvo has launched its Care by Volvo subscription service across the UK, claiming that the scheme offers a “genuine, flexible alternative” to buying a car. AUTOCAR. Accessed 02 February 2021 at: https://www.autocar.co.uk/car-news/industry/volvo-launches-new-car-subscription-service-uk
Automotive World. (2020). Care by Volvo car subscription now more flexible than ever. Accessed 16 April 2021 at: https://www.automotiveworld.com/news-releases/care-by-volvo-car-subscription-now-more-flexible-than-ever/
EMF (2015). Growth Within: A circular economy vision for a competitive Europe. Ellen MacArthur Foundation. Available at: https://www.ellenmacarthurfoundation.org/publications/growth-within-a-circular-economy-vision-for-a-competitive-europe
Sunfleet. (2021). About Sunfleet. Accessed 16 April 2021 at: https://www.sunfleet.com/om-sunfleet/
Tukker, A. (2004). Eight types of product–service system: Eight ways to sustainability? Experiences from SusProNet. Business Strategy and the Environment, 13(4), 246–260. https://doi.org/10.1002/bse.414
Tukker, A. (2015). Product services for a resource-efficient and circular economy – a review. Journal of Cleaner Production, 97, 76–91. https://doi.org/10.1016/j.jclepro.2013.11.049
Vovlo Cars USA. (2020). Care by Volvo car subscription now more flexible than ever. Accessed 16 April 2021 at: https://www.media.volvocars.com/us/en-us/media/pressreleases/273020/care-by-volvo-car-subscription-now-more-flexible-than-ever
Volvo. (2018). Care by Volvo – a new take on car ownership. Accessed 02 February 2021 at: https://group.volvocars.com/news/connectivity/2018/care-by-volvo
Volvo. (2021a). Care by Volvo. Accessed 03 February 2021 at: https://www.volvocars.com/us/care-by-volvo/
Volvo. (2021b). Care by Volvo: Frequently Asked Questions. Accessed 02 February 2021 at: https://www.volvocars.com/us/care-by-volvo/faq/
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About project Circular X
Project Circular X is about ‘Experimentation with Circular Service Business Models’. It is an ambitious research project funded by the European Research Council (ERC) which supports top researchers from anywhere in the world. Project CIRCULAR X runs from 2020-2025. The project is led by Principal Investigator (PI) Prof Dr Nancy Bocken, who is joined by a multidisciplinary team of researchers at Maastricht Sustainability Institute (MSI), Maastricht School of Business and Economics, Maastricht University. The project cooperates with businesses who want to innovate towards the circular economy.
Project Circular X addresses a new and urgent issue: experimentation with circular service business models (CSBMs). Examples of such new business models include companies shifting from selling products to selling services and introducing lifelong warrantees to extend product lifetimes. However, CSBMs are far from mainstream and research focused on experimentation is little understood. The research aims to conduct interdisciplinary research with 4 objectives:
- Advancing understanding of CSBMs; their emergence and impacts
- Advancing knowledge on CSBM experimentation
- Developing CSBM experimentation tools
- Designing and deploying CSBM experimentation labs
Funding source
This project has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme, grant agreement No. 850159.
Using of this information
When you refer to this case, please use the following source:
Circular X. (2021) Case study: Care by Volvo. Accessed from www.circularx.eu
