2019-1-15 CNCDA Petition Re Care by Volvo

1 MICHAEL CYPERS - State Bar No.
100641
mcypers@glaserweil.com
2 JULIE R. F. GERCHIK - State Bar No. 237764
jgerchik@glaserweil.com
3 LAUREN H. BRAGIN - State Bar No. 286414
lbragin@glaserweil.com
4 GLASER WEIL FINK HOWARD
AVCHEN & SHAPIRO LLP
5 10250 Constellation Boulevard, 19th Floor
Los Angeles, California 90067
6 Telephone: (310) 553-3000
Facsimile: (310) 556-2920
7
Attorneys for Petitioner
8 CALIFORNIA NEW CAR DEALERS
ASSOCIATION
9
STATE OF CALIFORNIA
10
NEW MOTOR VEHICLE BOARD
11
12
In the Matter of the Petition of Petition No.
13
CALIFORNIA NEW CAR DEALERS
14 ASSOCIATION PETITION
[V.C. sec. 3050(c)(1) or (3)]
15 Petitioner,
16 v.
17 VOLVO GROUP NORTH AMERICA LLC aka
VOLVO CAR USA, LLC,
18
Respondent.
19
20
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22
23
24
25
26
27
28
1
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1 Petitioner, the California New Car Dealers Association (“CNCDA”), through its attorneys,
2 files this petition under the provisions of the California Vehicle Code (“VC”) section 3050(c) and
3 alleges as follows:
4 1. Petitioner CNCDA is a statewide trade association that represents the interests of
5 over 1,000 franchised new car and truck dealer members. CNCDA members are primarily engaged
6 in the retail sale and lease of new and used motor vehicles, and are also involved in automotive
7 service, repair and part sales. CNCDA is not a licensee of DMV and appears herein as a “person”
8 pursuant to VC sections 3050(c) 1 and 470 2.
9 2. Respondent Volvo Group North America LLC also known as Volvo Car USA, LLC
10 (collectively, “Volvo”), is a licensee of the Department of Motor Vehicles (“DMV”) authorized and
11 licensed to do business and doing business in the State of California (Vehicle Manufacturer License
12 No. 49551). Volvo’s mailing address is 7900 National Service Rd., Greensboro, NC 27409. Volvo’s
13 telephone number is (336) 393-2268. On information and belief, Volvo is a subsidiary of Sweden-
14 based Volvo Car Corporation, which is a subsidiary of Volvo Car Group (“Volvo Cars”). 3 Volvo
15 Cars has been owned by the Chinese multinational automotive manufacturing company Geely
16 Holding Group (“Geely”) since 2010. Geely’s owner, Chinese billionaire Li Shufer, is the Chairman
17 of the Board of Volvo Cars.
18 3. CNCDA is represented in this matter by its counsel, Michael Cypers (SBN 100641),
19 Julie R. F. Gerchik (SBN 237764), and Lauren H. Bragin (SBN 286414) of Glaser Weil Fink
20 Howard Avchen & Shapiro LLP whose address is 10250 Constellation Blvd., 19th Floor, Los
21 Angeles, CA 90067. Mr. Cypers, Ms. Gerchik, and Ms. Bragin are each licensed to practice before
22
23
1
“The Board shall … [c]onsider any matter concerning the activities or practices of any person …
24 holding a license as a … manufacturer … submitted by any person.” Veh. Code § 3050(c).
2
25 “‘Person’ includes a[n] … association.” Veh. Code § 470.
3
Volvo Cars is the parent company of Volvo Car AB (a public company). Volvo Car AB holds
26 shares in its subsidiary Volvo Car Corporation. Volvo Car AB indirectly, through Volvo Car
Corporation and its subsidiaries, operates in the automotive industry with business relating to the
27 design, development, manufacturing, marketing and sales of cars and related services. Volvo Car
Group and its global operations are referred to as “Volvo Cars.” Volvo Cars is managed by the
28 Executive Management Team, led by the CEO and overseen by Volvo Car AB’s Board of Directors.
2
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1 all courts in the State of California.
2 Introduction
3 4. “DON’T BUY OUR CARS.” “SUBSCRIBE, DON’T BUY.” At the November,
4 2018 Los Angeles motor show press days, Volvo brought its CEO and managing senior executives
5 who spoke at a press conference. Unlike every other auto manufacturer, Volvo did not display a
6 single car on its stand. Instead, it displayed enormous electronic banners proclaiming the above
7 statements for its press conference. Volvo’s intentions were and are crystal clear.
8 5. In November 2017, Volvo introduced a “subscription model” called Care by Volvo
9 (“CbV”). Volvo’s characterization of CbV as a “subscription” is a clever, but illegal, marketing
10 ploy. CbV is an “all-inclusive” two-year lease with a fixed, standardized, pre-determined monthly
11 fee. It includes the cost of the vehicle, insurance, maintenance, road hazard protection and normal
12 wear-and-tear. CbV is available for two Volvo models, the popular sports utility vehicle (“SUV”)
13 XC40 (R-design or Momentum) and also the S60 (R-design or Momentum). Both of these Volvo
14 models are also sold or leased by Volvo dealers directly to consumers outside the CbV program.
15 Volvo admits in internal documents and in documents provided to consumers that the CbV
16 transaction is a lease. Volvo tries to obscure the true nature of the CbV lease from consumers by
17 marketing it as a “subscription service.”
18 6. CbV usurps the traditional sales role of Volvo dealer franchisees (“dealers”).
19 Consumers sign up for the program and make a deposit directly to Volvo through the Volvo
20 website. Dealers have minimal involvement in the transaction. They are prohibited from answering
21 questions about the CbV program and deprived of the opportunity to develop a relationship with
22 CbV customers. Instead, dealers are largely relegated to the performance of ministerial tasks: after
23 the customer secures the car through the Volvo website and pays the deposit directly to Volvo, the
24 dealer processes final paperwork such as registration and physically delivers the car to the customer.
25 7. Volvo is the sole arbiter of the dealer’s earnings for CbV transactions and currently
26 caps the margin at 8%, which is subject to change at any time.
27
28
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1 8. Volvo’s CbV program violates multiple provisions of the VC, each of which
2 constitutes a separate ground for discipline with respect to Volvo’s DMV license under VC section
3 11705(a).
4 9. First, CbV constitutes illegal competition between manufacturer and dealer in
5 violation of VC section 11713.3(o) because Volvo is effectively leasing cars directly to consumers.
6 At the same time, dealers are trying to sell or lease the very same model of Volvo-manufactured
7 vehicles directly to consumers. Thus, through CbV, Volvo is competing against dealers.
8 “Subscription programs” like CbV have been described as a way for the manufacturer to cut out the
9 dealer and ultimately eliminate the franchise model.
10 10. Second, CbV fundamentally changes the relationship between Volvo and its dealers
11 and expressly makes the Volvo dealers in the CbV transaction “agents” of Volvo, directly contrary
12 to Volvo’s franchise agreements. CbV constitutes a modification to Volvo’s franchise agreements,
13 which requires notice under VC section 3060(b) and an opportunity for dealers to challenge the
14 change at this Board. Volvo failed to give the required notice.
15 11. Third, CbV unfairly discriminates in favor of dealerships controlled, in part, by
16 Volvo in direct violation of VC section 11713.3(u). CbV requires dealers to serve as agents of
17 Volvo Car Financial Services U.S., LLC (“VCFS”). 4 As the principal, Volvo necessarily exercises
18 control over its dealer agents who participate in CbV. 5 And Volvo assigns a share of certain highly-
19 desirable, limited supply vehicles to CbV dealers to the exclusion of non-CbV dealers who have
20 declined to participate in CbV and are not controlled by Volvo.
21 12. Fourth, CbV undermines the purpose of VC section 11713.19, the “payment
22 packing” statute, which prohibits licensed dealers from bundling services and options absent
23 disclosure of the cost of each included good and service. While Volvo is not a licensed dealer, it is
24
4
25 Like Volvo, VCFS is a wholly owned subsidiary of Volvo Car Corporation, and they share
personnel and the same address. (See https://www.volvocarfinancialservices.com/about-us.) The VC
26 treats acts of a subsidiary as acts of the parent company.
5
Control is defined as “[t]he direct or indirect power to govern the management and policies of a
27 person or entity, whether through ownership of voting securities, by contract, or otherwise; the
power or authority to manage, direct, or oversee <the principal exercised control over the agent>.”
28 Black’s Law Dictionary (10th ed. 2014) (defining control).
4
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1 using CbV to circumvent consumer protection laws that would otherwise be applicable to a dealer
2 leasing or selling vehicles to consumers.
3 13. CNCDA respectfully requests that this Board provide the relief available under VC
4 section 3050 by (1) directing DMV to conduct an investigation of the matters described herein and
5 issue a written report within 90 days of the date of the Board’s order that the DMV investigate, or
6 (2) order the DMV to exercise its authority and power to initiate disciplinary proceedings or take
7 other such steps as may be necessary to stop CbV.
8 Legislative Background
9 14. The auto dealer franchise system was originally developed by manufacturers as a
10 cost-effective way to expand into local markets and tap into a franchise dealer’s superior knowledge
11 about those markets. Manufacturers viewed the system as enabling them to expand sales territories
12 without sacrificing scarce corporate capital because local dealers were strongly incentivized to
13 invest their own resources in marketing both the manufacturer’s and their own dealer brand to their
14 local customer base.
15 15. Over time, dealers learned that they were largely at the mercy of manufacturers,
16 despite dealers’ large investments in infrastructure to sell cars. Manufacturers had the power to
17 replace them, refuse to allocate popular inventory to them, or to start up nearby competitors. In
18 response to the obvious disparity in economic power, dealers prevailed upon their local regulators to
19 pass legislation governing the relationship between dealers and the manufacturers whose cars and
20 trucks they sell. Specifically, in 1972, the California Legislature passed the Automobile Franchise
21 Act (the “Act”) “‘in order to avoid undue control of the independent new motor vehicle dealer by
22 the vehicle manufacturer or distributor’” (among other reasons). (New Motor Vehicle Bd. of
23 California v. Orrin W. Fox Co. (“Fox”) (1978) 439 U.S. 96, at 101, fn. 6 citing Historical and
24 Statutory Notes for Veh. Code.)
25 16. These franchise laws protect local dealers from complete control by manufacturers
26 under circumstances in which manufacturers hold disproportionate market power over dealers. (See
27 Will the Net Turn Car Dealers into Dinosaurs? State Limits on Auto Sales Online, 58 Cato Inst. 1, 2
28 (July 25, 2000) (citing Patrick Danner, Right of Way Fight: State Law Bans Carmakers from Selling
5
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1 Directly to Public, but Consumers and Manufacturers Want Change, Broward Daily Bus. Rev.,
2 Mar. 24, 2000, at A12).)
3 17. The franchise laws are designed to prevent predatory practices by manufacturers such
4 as forcing dealerships to accept unwanted deliveries of cars and requiring “line-make” 6 franchise
5 dealerships to incur unnecessary advertising expenses. (Fox, 439 U.S. at 100-101 (holding that a
6 “disparity in bargaining power between automobile manufacturers and their dealers prompted
7 Congress and some States to enact legislation to protect retail car dealers from perceived abusive
8 and oppressive acts by the manufacturers.”); see also Tober Foreign Motors v. Reiter Oldsmosible,
9 381 N.E.2d 908, 914 (Mass. 1978) (noting that Congress invited the states to write legislation to
10 “redress the imbalance of economic power between manufacturer and dealer.”); Stephen M.
11 Fox, Two Roads Diverged: Tesla, Interruption, and the Commerce Clause (2016) 22 B.U. J. Sci. &
12 Tech. L. 153, 155.)
13 18. Notably, “the California Legislature was empowered to subordinate the franchise
14 rights of automobile manufacturers to the conflicting rights of their franchisees where necessary to
15 prevent unfair or oppressive trade practices.” (Fox, 439 U.S. at 107 (emphasis added); see also
16 Powerhouse Motorsports Grp., Inc. v. Yamaha Motor Corp., U.S.A. (2013) 221 Cal.App.4th 867,
17 877 (noting that some 25 states have enacted legislation to protect dealers from “abusive and
18 oppressive acts by the manufacturers.”).)
19 Definition of a Franchise
20 19. VC section 331 states:
21 (a) A “franchise” is a written agreement between two or more
22
persons having all of the following conditions:
23 (1) A commercial relationship of definite duration or

continuing indefinite duration.
24
(2) The franchisee is granted the right to offer for sale or
25 lease, or to sell or lease at retail new motor vehicles or new trailers
subject to identification pursuant to Section 5014.1 manufactured
26
27
6
“Line-make” means a group or series of motor vehicles that have the same brand identification or
28 brand name, based upon the manufacturer’s trademark, trade name, or logo.
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or distributed by the franchisor or the right to perform authorized
1
warranty repairs and service, or the right to perform any
2 combination of these activities.
3 (3) The franchisee constitutes a component of the

franchisor's distribution system.
4
(4) The operation of the franchisee's business is
5 substantially associated with the franchisor's trademark, trade
name, advertising, or other commercial symbol designating the
6
franchisor.
7
(5) The operation of a portion of the franchisee's business
8 is substantially reliant on the franchisor for a continued supply of
new vehicles, parts, or accessories.
9
(b) The term “franchise” does not include an agreement entered
10 into by a manufacturer or distributor and a person where all the
following apply:
11
12 (1) The person is authorized to perform warranty repairs

and service on vehicles manufactured or distributed by the
13 manufacturer or distributor.
14 (2) The person is not a new motor vehicle dealer

franchisee of the manufacturer or distributor.
15
(3) The person's repair and service facility is not located
16
within the relevant market area of a new motor vehicle dealer
17 franchisee of the manufacturer or distributor.
18 Competition Between Manufacturer and Dealer
19 20. Pursuant to VC section 11713.3(o)
20 It is unlawful and a violation of this code for a manufacturer,

manufacturer branch, distributor, or distributor branch licensed
21
pursuant to this code to do, directly or indirectly through an
22 affiliate, any of the following: …
23 (o)(1) To compete with a dealer in the same line-make

operating under an agreement or franchise from a manufacturer or
24 distributor in the relevant market area.
25 (emphases added).
26 21. This statute was expressly justified as part of a package of protections for dealers
27 against the exercise of superior manufacturer bargaining power. (See Exhibit A, Legislative History
28 Analysis – AB 225 (Gonsalves).)

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1 Franchise Agreement Modifications
2 22. VC section 3060(b) states, in relevant part, that:
3 [N]o franchisor shall modify or replace a franchise with a
4
succeeding franchise if the modification or replacement would
substantially affect the franchisee's sales or service obligations
5 or investment, unless the franchisor has first given the board and
each affected franchisee written notice thereof at least 60 days in
6 advance of the modification or replacement. Within 30 days of
receipt of the notice, satisfying the requirement of this section, or
7 within 30 days after the end of any appeal procedure provided by
8
the franchisor, a franchisee may file a protest with the board and
the modification or replacement does not become effective until
9 there is a finding by the board that there is good cause for the
modification or replacement.
10
11 (emphasis added).
12 Unfair Favoritism Towards Manufacturer Owned or Controlled Distributors
13 23. VC section 11713.3 states, in relevant part:
14 It is unlawful and a violation of this code for a manufacturer,
15
manufacturer branch, distributor, or distributor branch licensed
pursuant to this code to do, directly or indirectly through an
16 affiliate, any of the following:
17 (u)(1) To unfairly discriminate in favor of a dealership

owned or controlled, in whole or in part, by a manufacturer or
18 distributor or an entity that controls or is controlled by the
19
manufacturer or distributor. Unfair discrimination includes, but is
not limited to, the following:
20
(A) The furnishing to a franchisee or dealer that is
21 owned or controlled, in whole or in part, by a manufacturer,
branch, or distributor of any of the following:
22
(i) A vehicle that is not made available to
23
each franchisee pursuant to a reasonable allocation formula that is
24 applied uniformly, and a part or accessory that is not made
available to all franchisees on an equal basis when there is no
25 reasonable allocation formula that is applied uniformly.
26 […]
27
(B) Referring a prospective purchaser or lessee to a dealer
28 in which a manufacturer, branch, or distributor has an ownership
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interest, unless the prospective purchaser or lessee resides in the
1
area of responsibility assigned to that dealer or the prospective
2 purchaser or lessee requests to be referred to that dealer.
3 Payment Packing
4 24. VC section 11713.19, the “payment packing” statute, states:
5
(a) It is unlawful and a violation of this code for the holder of any
6 dealer’s license issued under this article to do any of the following:
7 (1) Negotiate the terms of a vehicle sale or lease contract

and then add charges to the contract for any goods or services
8 without previously disclosing to the consumer the goods and
services to be added and obtaining the consumer’s consent.
9
10 (2)(A) Inflate the amount of an installment payment or

down payment or extend the maturity of a sale or lease contract for
11 the purpose of disguising the actual charges for goods or services
to be added by the dealer to the contract.
12
(B) For purposes of subparagraph (A), “goods or
13
services” means any type of good or service, including, but not
14 limited to, insurance and service contracts.
15 Care by Volvo (CbV)

16 25. Volvo launched a new leasing program called CbV in the United States on November
17 29, 2017. The CbV program allows customers to order a car directly from the manufacturer either
18 on the Volvo website or using a smart phone. Customers pay a flat monthly fee to lease the vehicle
19 for 24 months. A customer can upgrade to a new model or new model year after 12 months at the
20 then-current subscription price, which resets the two-year term. Included in the monthly flat fee are:
21 factory-scheduled maintenance, wear and tear protection, roadside assistance, tire and wheel road
22 hazard protection, a personal auto insurance policy provided by Liberty Mutual Insurance, and
23 Volvo’s 24-hour Concierge.
24 26. CbV’s lease with the customer is a binding and non-transferable contract, which
25 allows the customer 15,000 miles annually over the 24-month term. In the initial phase, the Volvo
26 XC40 SUV was available through CbV for $650 to $850 per month, depending on the configuration
27 of the vehicle. Currently, CbV is offered for both the XC40 SUV at $700 per month for the
28 premium Momentum design or $800 per month for the sport R-design. The S60 Sedan is offered at
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1 $750 per month for premium or $850 per month for sport. The XC40 and the S60 are both available
2 for purchase or lease directly from Volvo dealers. Due to its popularity, there is a shortage of
3 XC40s. CbV exacerbates that shortage by carving out cars that dealers otherwise could have sold to
4 consumers themselves, without CbV.
5 27. The customer does not have the ability to trade-in (e.g., as an offset against cost) his
6 or her pre-CbV vehicle to the dealer as part of the CbV program.
7 28. The customer can lease directly from Volvo under the CbV program by ordering on-
8 line or via the CbV application on a smart phone. A customer who wants to lease a vehicle through
9 CbV first enters the website and choses the model. Next, the customer choses the “trim” – the
10 component parts of the type of lease she or he would like. The so-called premium design
11 “Momentum Subscription” includes such options as smartphone integration, wireless phone
12 charging, heated steering wheel, and a panoramic moonroof. The sport “R-Design Subscription”
13 includes a premium sound system, a 360 degree surround view camera, and LED active bending
14 lights, in addition to everything that comes with the Momentum. Next the customer choses between
15 a 248 horsepower engine or a 258 horsepower engine. Then the customer choses the color, the size
16 of the wheel, the color upholstery, and the interior styling. Once the car has been customized, the
17 customer only needs to fill out his or her name, contact information, agree to the terms and
18 conditions, and pay the $500 refundable deposit to Volvo. At this point, the CbV order is complete.
19 29. Once the order is completed, a member of Volvo’s CbV Concierge team – not a
20 representative of any Volvo dealer – contacts the customer to confirm his or her order and help the
21 customer complete the online credit application and enrollment in the Liberty Mutual insurance
22 policy. (See Exhibit B, CbV Announcement Retailers.) When the car is ready, the “Volvo Concierge
23 will serve as the liaison between the customer, VCUSA and the retailer.” (Id.) The car will be
24 allocated from “port stock” after the order is confirmed and the Volvo Concierge will coordinate the
25 delivery of the vehicle to the retailer the customer chooses. (Id.) The retailer will typically be
26 selected based on proximity to the customer’s zip code, however a customer can choose an alternate
27 retailer if she or he wishes. (Id.) When the customer arrives at the dealership, the dealer will interact
28 with the customer for the first time to make delivery of the new vehicle, familiarize the customer
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1 with it, and answer any questions. (Id.) The dealer will also serve the administrative function of
2 handling the titling and registration of the vehicle.
3 30. CbV appears to be part of Volvo’s parent company Volvo Cars’ global business
4 strategy. At Volvo’s LA Auto Show press conference, President of Volvo Cars North America
5 Anders Gustafsson stated: “This is a national program. It’s not a test in two, three countries. Two,
6 three states. This is a full scale US and, I would say, seven countries in Europe.” (Available on the
7 Volvo Cars YouTube channel at https://www.youtube.com/watch?v=UH8g-AHMVcM at 0:41-
8 0:52.)
9 31. In executing CbV, Volvo has effectively either ignored California law or hoped that
10 it wouldn’t get in the way. Volvo Cars’ executives have publicly stated in various other countries
11 that their ultimate goal is to eliminate the franchise dealer model. (See Exhibit C, Jalopnik Article
12 (emphasis added) (also noting that “[t]hey’re sort of testing the waters with the Care by Volvo
13 program”).)
14 32. CNCDA has informed Volvo that it has concerns with the legality or illegality of
15 several aspects of the CbV program. (See Exhibit D, Correspondence between CNCDA and Volvo.)
16 While Volvo has pledged to make certain changes to the program (id.), the proposed changes do not
17 resolve CNCDA’s chief concerns, nor is there any guarantee that Volvo will implement some or all
18 of them, or when.
19 FIRST VIOLATION:
20 Care by Volvo Creates Competition Between Manufacturer and Dealers and Therefore
21 Violates VC Section 11713.3
22 33. CbV creates unlawful competition between manufacturer and dealers: it diverts
23 customers away from dealers to Volvo with the apparent ultimate goal of bypassing the franchise
24 model entirely. Such business practices are expressly prohibited under California law (as well as the
25 laws of numerous other states) and undermine the fundamental purpose of California’s robust new
26 motor vehicle franchise regulatory scheme.
27 34. The VC expressly prohibits manufacturers from engaging in “intrabrand competition
28 [that] would be injurious to the existing franchisees and to the public interest.” Fox, 439 U.S. at
11
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1 100–01. Specifically, VC (“VC”) section 11713.3(o)(1) provides that:
2
It is unlawful and a violation of this code for any manufacturer [or]
3 manufacturer branch . . . directly or indirectly through an affiliate
… [t]o compete with a dealer in the same line-make operating under
4 an agreement or franchise from a manufacturer . . . in the relevant
market area.
5
6 (Emphasis added.)
7 35. Competition occurs when multiple entities engaged in the same market in the same
8 type of industry (e.g. offering similar products) work to obtain the same business from third parties.
9 (Black’s Law Dictionary (10th ed. 2014) (defining “competition” and “covenant not to compete”).)
10 36. California is among the majority of states that explicitly prohibit competition by
11 manufacturers against same line-make dealers. The universality of such laws underscores the
12 California legislature’s sound judgment in preventing a practice that would permit manufacturers to
13 take advantage of the inequality of economic resources between manufacturers and dealers. (See e.g.
14 Ungar v. Dunkin’ Donuts of America, Inc., 531 F.2d 1211, 1222-1223 (3d Cir. 1976) (“Franchising
15 involves the unequal bargaining power of franchisors and franchisees and therefore carries within
16 itself the seeds of abuse.”).)
17 37. For CbV transactions, Volvo dictates the material terms of the offer of sale to the
18 consumer. The consumer must accept those terms before title to the vehicle is transferred to the
19 dealer. The dealer, in contrast to traditional lease and sale transactions, is merely an agent for Volvo,
20 and only receives title upon delivery. The dealer effectively assigns the title back to Volvo, whose
21 leasing company, VCFS, leases the vehicle to the consumer. The dealer never truly has control over
22 the vehicle – it merely flows through the dealership to enable the dealer to process licensing and
23 registration per state law. The transaction between Volvo and the dealer in CbV is illusory. Volvo is
24 effectively acting as the dealer in the CbV lease. (See Exhibit E, Report of Vaughn Sigmon 7
25 (“Sigmon Rpt.”) ¶ 9.)
26
27
7
Vaughn Sigmon is an automotive industry expert whose report is submitted by CNCDA
28 concurrently with this Petition.
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1 38. In a situation similar to this case, a Texas court determined that Ford was unlawfully
2 competing against its dealers. Ford operated a web site through which consumers could view flat-
3 rate, negotiation-free prices on cars available for sale or lease. (Ford Motor Co. v. Texas Dept. of
4 Transp. (W.D. Tex. 2000) 106 F.Supp.2d 905, 907, aff’d (5th Cir. 2001) 264 F.3d 493.) The
5 consumer could place a “hold” on a specified vehicle by making a refundable deposit and by
6 designating a specific dealership at which to view the car. (Id.) If the consumer decided to purchase
7 the vehicle after a test drive, then the consumer and the dealership entered into a sales agreement.
8 (Id.) The terms of any trade-in were negotiated between the consumer and the dealer. (Id.) Dealer
9 participation in Ford’s program, which required an agreement to honor Ford’s flat-rate price, was
10 voluntary on the part of the dealer. (Id.)
11 39. The court found that, through the program, manufacturer Ford was acting in the
12 capacity of a dealer and thereby competing with Ford dealers. (Ford Motor Co. v. Texas Dept. of
13 Transp. (W.D. Tex. 2000) 106 F.Supp.2d 905, 912.) The court based its holding on, among other
14 things, the facts that Ford: (a) chose which vehicles to include in the program, (b) set the price for
15 the vehicles, (c) determined the commission of the dealer who formalized the “sale,” and (d) held
16 title to the vehicle until the consumer accepted the price set by Ford and made a refundable deposit.
17 The court also noted that “[i]n our economy, [Ford’s] ability to dictate the price for the vehicles
18 offered [through the program] affects a dealer’s ability to set the price for similar vehicles at the
19 dealership.” (Id at 913.)
20 40. Here, the facts underlying Volvo’s CbV program are strikingly parallel to Ford. Like
21 Ford in 2000, Volvo is now directly competing against its dealers through its CbV program. The key
22 facts are parallel: (a) Volvo selects which vehicles are part of the CbV program; (b) Volvo sets the
23 price for those vehicles; (c) Volvo determines the commission of the dealer who formalizes the
24 “subscription” to the vehicle; and (d) Volvo holds title to the CbV car until a consumer accepts the
25 price set by Volvo and makes a refundable deposit via the CbV website. As with the Ford dealers,
26 Volvo’s ability to set prices for the vehicles included in the CbV program affects the ability of all
27 dealers to set prices for those same vehicles at their dealerships. All dealers, especially those who do
28 not participate in CbV, must take Volvo’s pricing of CbV cars into account when pricing their own
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1 inventory in order to remain competitive.
2 41. CbV is not a mere alternative to traditional means of acquiring a car; CbV is a direct
3 competitor to the Volvo dealer. Volvo leases XC40 SUVs and S60 sedans directly to California
4 consumers through CbV; at the same time, its California dealers are trying to sell or lease these
5 same models of Volvo cars to consumers. (See Exhibit F, Report of Dr. Andrew Safir 8 (“Safir Rpt.”)
6 at pp. 7-8.) Further compounding the issue, CbV targets “the same customer base as that targeted by
7 Volvo dealerships – higher-income potential automotive purchasers interested in Volvo vehicles.”
8 (Id. at p. 7.) And “every successful CbV subscription … eliminates the possibility of a dealer
9 transaction with the same customer.” (Id. at p. 8.)
10 42. Perhaps the most stark example of Volvo’s intent to compete with and divert sales
11 from dealers is that Volvo showed no cars during the press days at the November, 2018 Los Angeles
12 Auto Show. 9 Volvo Cars’ senior executive team including, among others, President and CEO Håkan
13 Samuelson, President of Volvo Cars North America Anders Gustafsson, Head of Product Strategy &
14 Business Ownership Mårten Levenstam, Head of Research and Development Henrik Green, Head of
15 Corporate Communication David Ibison, and Director of Mobility Solutions and Head of CbV Peter
16 Wexler, held an in-person press conference and projected electronically, in large letters above its
17 executive speakers, signs reading “DON’T BUY OUR CARS” and “CBV: SUBSCRIBE, DON’T
18 BUY.” (See Exhibit G, Photos of Signs.)
19 43. Volvo’s complete product lineup includes three SUVs (XC40, XC60, XC90), two
20 sedans (S60, S90), and two crossovers (V60, V90). For five of the seven lines, Volvo has “all-new”
21 2019 models. CbV, on the other hand, only includes two models (XC40 and S60). Yet, Volvo
22 dedicated a substantial portion of its show space at the Los Angeles Auto Show to advertising CbV
23 and discouraging consumers from buying Volvo cars from Volvo dealers—not just the models a
24
25 8
Andrew Safir is an economist whose expert report is submitted by CNCDA concurrently with this
26 Petition.
9
Volvo showed zero cars during press and industry days at the Los Angeles Auto Show, preferring
27 instead to showcase CbV and its related advertising campaign encouraging subscriptions to, and
expressly discouraging the purchase of, Volvo cars. However, Volvo later moved in cars for the
28 consumer days.
14
PETITION
1575432
1 consumer has the option to lease through CbV, but rather all Volvo models.
2 44. Indeed, a December 2018 Bloomberg article reported that Volvo’s new campaign in
3 Germany, like the one in Los Angeles, utilizes the slogan “Don’t Buy This Car.” (See Exhibit H,
4 Bloomberg Article.) The Bloomberg article explains that this marketing tactic “fits with Volvo’s
5 strategy of steering drivers toward ‘subscriptions.’” (Id.) As Volvo CEO Håkan Samuelsson
6 described, Volvo is “going from being a wholesaler to being a direct business partner… it’s a very
7 good way of building customer service relations and securing business over a long time.” (Id.
8 (emphasis added).) Volvo’s intent is clear: to divert business from dealers to Volvo – diminishing
9 the role of dealers or eventually eliminating dealers altogether. That is competition plain and simple.
10 45. Volvo admits that the eventual aim of CbV and similar Volvo initiatives worldwide
11 is to eliminate the franchise model and sell directly to consumers. For example, in an October 2018
12 article about Lynk & Co. – the new Geely/Volvo venture to sell cars exclusively via subscriptions –
13 CEO Alain Visser’s vision for the company was described as a “plan to save by streamlining
14 distribution and eliminating the dealer model, which they feel is wasteful.” (See Exhibit C,
15 Jalopnik Article (emphasis added) (also noting that “[t]hey’re sort of testing the waters with the
16 Care by Volvo program”).) Volvo considers CbV the “solution” and intends to expand the program
17 to include “the total portfolio” of Volvo vehicles. (See Exhibit I, Roadshow Article (quoting
18 President of Volvo Cars North America Anders Gustafsson).) Volvo expects subscriptions to
19 account for “half its output by 2025.” (See Exhibit G, Bloomberg Article.)
20 46. Volvo maintains control over the all-important customer relationship throughout the
21 CbV process, which prevents dealers from developing enduring relationships with consumers,
22 stunting both future sales and profits. Customers who have a good experience purchasing their
23 vehicle will, on average, positively recommend the dealership to others between five and six times.
24 (Exhibit E, Sigmon Rpt., ¶¶ 29.) And customers who have very positive dealership experiences tend
25 to spend more money than customers who do not. (Id.) Thus, the time a dealer spends building
26 rapport with a consumer establishes the foundation for a long-term relationship, including servicing
27 the customer’s car throughout the entire leasing experience, the opportunity to purchase the
28 consumer’s prior vehicle (a “trade-in”), the possibility of selling add-on accessories and services,
15
PETITION
1575432
1 and a route to meaningful business leads to the customer’s friends and family – all of which afford
2 the dealer more opportunities for profit. (See Exhibit E, Sigmon Rpt., ¶¶ 20, 27-29, 41-43, 10.) CbV
3 short-circuits dealers’ ability to cultivate relationships. Indeed, customer reviews of CbV almost
4 universally fail to mention the dealer at all, which is “a strong indication … that this program
5 effectively leaves the dealer out of the customer mind and disassociates the dealer.” (Id. at ¶ 27.)
6 47. Volvo advertises CbV to the public as a unique service involving “No price
7 negotiation,” “One flat monthly rate with no surprises,” and “premium insurance no matter where
8 you live.” (See Exhibit J, Care by Volvo FAQs, available at
9 https://www.volvocars.com/us/shopping-tools/purchase/care-by-volvo.)
10 48. In a November 2017 CbV announcement to dealers, Volvo described the
11 “Advantages for Volvo Retailers” of the CbV program as:
12 * Increased throughput of vehicles
* Attracting new customer segments to Volvo brand[, and]
13 * Consistent 8% margin (subject to qualification as per any wholesale
vehicle) more often than average, traditional transactional methods[.] 10
14
15 (Exhibit B, CbV Announcement to Retailers.)
16 49. Volvo admits that the 8% margin is not as much as a retailer would make on a
17 traditional sale or lease. (See Exhibit B, CbV Announcement to Retailers.) And Volvo has not
18 committed to maintain this 8% margin for dealers for any set period of time – it is subject to change
19 at any time. The current plan of delivery is also subject to Volvo’s whim – direct delivery to the
20 customer could be implemented at any point, thereby cutting the dealer out altogether.
21
22
23
24
10
Volvo goes on to explain that CbV “offers retailers the ability to make an 8% margin more often
25 than a slightly higher percentage on a traditional sale or lease. For example, if the Care by Volvo
customer opts to upgrade their vehicle every 12 months, the retailer would realize an 8% margin
26 three times over a 36-month period. This is a greater dollar amount than the slightly larger
percentage that could be earned over the same period in a traditional lease or sale.” (Exhibit B, CbV
27 Announcement to Retailers.) Volvo fails to acknowledge, however, that even in a traditional lease,
consumers can trade in their car early for an upgrade to a new model as long as they sign a new,
28 extended lease.
16
PETITION
1575432
1 50. Through CbV, Volvo is now undercutting and will always be able to undercut dealer
2 pricing on vehicles that dealers lease to customers outside CbV. (Exhibit F, Safir Rpt., pp. 10-11
3 (“Volvo appears to be undercutting any potential dealer offering by about $250 per month.”).)
4 Volvo has an inherent competitive advantage over its dealer franchisees. It can take advantage of the
5 expensive showrooms and infrastructure built over many years by Volvo dealers promoting the
6 Volvo brand, without having to account for those expenses or for the dealers’ overhead when
7 pricing vehicles for direct sales to consumers. (Id.) And dealers who are dependent upon Volvo for
8 vehicle allocations and sales support are vulnerable to such abuse. (See Exhibit F, Safir Rpt., at p.
9 8.) Volvo dealers simply cannot compete with Volvo’s direct to consumer pricing. (Id. at pp. 10-12.)
10 51. “Due to this direct competition, Volvo is creating adverse consequences to the
11 existing dealer’s economics, including future sales, customer good will and profitability.” (See
12 Exhibit E, Sigmon Rpt., ¶ 8; see also Exhibit F, Safir Rpt., p. 13.) Over time, CbV poses a
13 substantial risk of reducing the number of Volvo dealers in California. (Exhibit F, Safir Rpt., pp. 6,
14 13; Ex. E, Sigmon Rpt., ¶ 47.)
15 52. Programs like CbV are precisely what VC section 11713.3(o) was enacted to prevent.
16 It is direct competition and it is prohibited by VC section 11713.3(o).
17 SECOND VIOLATION:
18 Volvo’s Failure to Give Written Notice to Franchisees and the Board About Care by Volvo
19 Violates VC Section 3060(b)
20 53. The VC prohibits franchisors such as Volvo from making franchise changes that
21 would “substantially affect the franchisee’s sales or service obligations or investment” absent 60
22 days’ written notice to the affected dealers and to this Board. Veh. Code § 3060(b). While CbV does
23 not modify the text of the Volvo franchise agreements, CbV is effectively a franchise modification
24 because it fundamentally alters the way dealers sell cars, which affects dealers’ sales obligations,
25 service obligations, and investment in the franchise. 11 (See Exhibit F, Safir Rpt., at pp. 13-15.)
26
11
27 While CbV is embodied in an agreement between dealers and VCFS (the Addendum), for
purposes of the VC generally and VC section 3060 particularly, the acts of a wholly owned
28 subsidiary should be treated as the acts of Volvo. Holding otherwise would undermine California
franchise law, allowing manufacturers to impose new obligations that conflict with or modify
17
PETITION
1575432
1 Volvo did not give 60 days’ notice of this franchise modification. That fact is not in dispute. This is
2 a clear violation of VC section 3060(b).
3 54. The fact that Volvo terms the CbV program “voluntary” has no bearing on an
4 assessment of whether CbV constitutes a franchise medication requiring statutory notice. The
5 negative financial impact of a dealer refusing to participate, coupled with the pressure Volvo exerts
6 to “encourage” dealer participation, render that choice illusory. (Postal Instant Press, Inc. v. Sealy
7 (1996) 43 Cal. App. 4th 1704, 1715–16 (recognizing a gross bargaining disparity between
8 franchisors and franchisees).) Volvo’s aggressive demand that dealers sign and return an Addendum
9 to Dealer Lease Agreement (“Addendum”) regarding participation in CbV within one week of
10 receipt 12, plus the fact that Volvo failed to provide any specific details about CbV – or even a
11 sample sales contract – to dealers before the signing deadline are evidence of the lopsided power
12 dynamic between Volvo and its dealers (a relationship courts have routinely recognized as ripe for
13 abuse). (See e.g. Ungar v. Dunkin’ Donuts of America, Inc., 531 F.2d 1211, 1222-1223 (3d Cir.
14 1976) (“Franchising involves the unequal bargaining power of franchisors and franchisees and
15 therefore carries within itself the seeds of abuse.”).)
16 55. While dealers may theoretically opt out, those who do risk losing customers
17 altogether because Volvo may reduce inventory allocations to the dealer for non-CbV transactions
18 (Exhibit E, Sigmon Rpt., ¶ 38 (explaining that Volvo’s request that its California dealers participate
19 in CbV is “coercive”)). In addition, if Volvo dealers decline to participate in CbV, as at least one
20 California Volvo dealer has done, Volvo will assign those customers who do lease a vehicle through
21 CbV to a competing CbV dealer, regardless of whether a closer dealer also sells and leases the same
22 Volvo model.
23
24
franchise agreements through their subsidiaries. CNCDA notes that manufacturers are forbidden
25 from unlawfully competing with dealers directly or through affiliates in VC sections 11713.3
subsections (o) and (u). Similarly, the VC must be applied to non-textual alterations to the franchise
26 relationship; otherwise, manufacturers could simply contract around VC section 3060: they could,
through an affiliate or subsidiary, institute franchise modifications without the required statutory
27 notice by creating a new, or modifying an existing, contract that undermines the terms of the
franchise agreement.
12
28 After CNCDA intervened, this was extended to 30 days’ notice.
18
PETITION
1575432
1 A. Care by Volvo Substantially Alters the Manufacturer-Dealer Relationship,
2 Which Impacts Dealer Sales, Service Obligations, and Profits.
3 56. CbV materially changes the relationship between dealer and manufacturer. By its
4 senior executives announcing boldly to the automotive community and press “DON’T BUY OUR
5 CARS” and “SUBSCRIBE, DON’T BUY,” Volvo is undercutting the dealer’s role under the
6 franchise agreement: to sell and lease Volvo vehicles to the public. Under CbV, Volvo usurps the
7 dealer’s traditional role as retailer and relegates the dealer instead to little more than an
8 administrator with ministerial tasks. (See Exhibit E, Sigmon Rpt., ¶¶ 19, 39.) This represents a
9 profound modification of the relationship between dealers and Volvo embodied in Volvo’s franchise
10 agreements. CbV transforms the dealer from entrepreneurial retailer and Volvo brand ambassador
11 into little more than paperwork-processor and car delivery service. Such a change necessarily alters
12 the dealer’s sales and service obligations under the franchise agreements.
13 57. Volvo dictates every aspect of a CbV transaction. Volvo even prohibits dealers from
14 answering questions about CbV. “If customers have questions or concerns, they need to call the
15 Care by Volvo Concierge Representative.” (Exhibit K, CbV Delivery Details.)
16 58. Care by Volvo requires dealers to agree, among other things, to:
17 • Act as an agent for VCFS;
18 • Sell the CbV earmarked vehicle to VCFS Auto Leasing Company at a sale price
19 equal to the dealer invoice (a price determined by Volvo), less the amount of any
20 dealer document fees;
21 • Execute a CbV lease contract form “supplied by VCFS”;
22 • Process paperwork, including: verifying the identity of the lessee; signing the lease
23 on behalf of VCFS; and completing vehicle license, title, and registration; and
24 • Deliver the vehicle to the lessee at the dealer’s physical location.
25 (Exhibit L, Addendum to Dealer Lease Agreement.)
26 59. Consumers must initiate the CbV purchase process through the Volvo website. Once
27 the order is confirmed, Volvo requires the dealer to “purchase” the CbV earmarked car from Volvo.
28 The dealer then (a) immediately sells the car back to Volvo, and (b) processes the lease paperwork
19
PETITION
1575432
1 between Volvo and the consumer. The dealer is simply the ministerial middleman through which
2 Volvo effectively leases a car directly to a consumer. (See Exhibit E, Sigmon Rpt., ¶¶ 4, 9, 19, 39.)
3 60. When a franchisee signs a franchise agreement and opens a car dealership franchise,
4 he or she is committing to sell and lease cars made by a particular name-brand manufacturer, and to
5 abide by the regulations and guidelines specific to that manufacturer.
6 61. Volvo’s franchise agreements, which CNCDA has been able to obtain from a wide
7 range of dealers, specify that the dealer is not an agent of Volvo and prohibits the dealer from
8 holding itself out as an agent of Volvo. In direct contrast, CbV requires dealers to act as agents for
9 Volvo. 13
10 62. CbV also reverses the role of who is a lessor to the customer. Under the Lease
11 Agreement for traditional non-CbV transactions, the dealer is lessor to the customer and the dealer is
12 expressly designated as an independent contractor of Volvo/VCFS, not an agent. By contrast, under
13 the Amendment, the dealer is expressly designated as VCFS’s agent in the transaction. In other
14 words, in the CbV transaction, VCFS (effectively, Volvo) is the driving force in the consumer
15 transaction, and the dealer is reduced to being an agent who handles the signing of customer
16 paperwork and delivering the vehicle to the customer.
17 63. CbV is a modification of the roles of Volvo and the dealer under the franchise
18 agreement. The fact that Volvo cleverly uses the Lease Agreement and the Addendum thereto to
19 effectuate the CbV transaction does not obscure the fact that CbV modifies the roles of
20 manufacturer and dealer.
21 64. CbV also impacts dealer investments in their Volvo franchises. California Volvo
22 dealers have, over decades, collectively invested enormous financial resources in the many millions
23 of dollars, and other resources, to promote the Volvo brand. (Exhibit E, Sigmon Rpt., ¶¶ 13-14, 18,
24 22-23.) In exchange, the franchisee has the contractual right to make sales and lease cars and to
25
26
13
Attached as Exhibit M are examples of Volvo franchise agreements. In some cases, only redacted
27 excerpts have been provided to protect the identities of the subject dealers who are concerned about
possible retaliation from Volvo. Should the board wish to receive complete, redacted versions of the
28 agreements for review in camera, counsel for CNCDA will make them available.
20
PETITION
1575432
1 profit from these investments.
2 65. However, under CbV, dealer compensation is capped by Volvo, determined at the
3 sole discretion of Volvo, and subject to change at Volvo’s whim. The CbV program documents
4 expressly state that, apart from compensation based upon the sale of the CbV vehicle 14, “[a]ll other
5 rights to compensation set forth in, or permissible under, the Dealer Lease Agreement are
6 inapplicable to the Care by Volvo Lease Program.” (Exhibit L, Addendum to Dealer Lease
7 Agreement.) In CbV, the dealer loses out on the opportunity to acquire used vehicles in trade, which
8 is a lucrative aspect of dealer operations. (See Exhibit E, Sigmon Rpt., ¶¶ 32-35.) In addition, there
9 is no opportunity for Finance & Insurance (“F&I”) department commissions because no additional
10 services can be added to the CbV subscription. F&I profit can account for 30% or more of a
11 franchise dealer’s profit. (See Exhibit E, Sigmon Rpt., ¶¶ 21, 35.)
12 66. CbV “substantially affect[s]” the franchisees’ “sales or service obligations” or
13 impacts their “investment” in their dealerships in violation of VC Section 3060(b). (See Exhibit E,
14 Sigmon Rpt., ¶¶ 13-14, 18, 22-23.) CbV is a franchise modification under the VC if it does any one
15 of the following: substantially affects the franchisee’s sales obligations, substantially affects the
16 franchisee’s service obligations, or substantially affects the franchisee’s investment. The statute is
17 written in the disjunctive. Any one qualifies as a franchise modification requiring notice to the
18 franchisee and to this Board. CbV does all three things specified in the statute. Under VC section
19 3060(b), CbV constitutes a franchise modification.
20 B. Care by Volvo Undermines Dealers’ Ability to Develop Long-Term Customer
21 Relationships, Which Impacts Dealer Sales, Service Obligations, and Profits.
22 67. CbV deprives dealers of the opportunity to form long-term, profitable relationships
23 by minimizing dealer involvement and interaction with prospective buyers. (See Exhibit E, Sigmon
24 Rpt., ¶¶ 14, 19-20, 27, 42-43.) In a non-CbV transaction, the dealer has the opportunity to build a
25 relationship with the consumer – to explain car options, take a test drive, find out about the
26
14
27 Currently, “8% of base MSRP subject to qualification” and “subject to possible change in the
future.” (Exhibit N, Care by Volvo PowerPoint Presentation by Peter Wexler, Director Mobility
28 Solutions and Head of CbV, to CNCDA on April 26, 2018.)
21
PETITION
1575432
1 consumer and his or her needs, and to negotiate lease terms. Not so with CbV: the majority of the
2 transaction occurs on the Volvo website and dealers are prohibited from engaging in relationship-
3 building activities, like answering questions about CbV.
4 68. With CbV, the essence of the customer relationship is hijacked by Volvo. The
5 customer’s experience with the dealer is limited to completing paperwork at the end of the
6 transaction. That limited interaction does not allow sufficient time for the dealer to develop a deep
7 enough relationship with the customer to establish loyalty. And customer loyalty is a major
8 component of future sales and profits:
9
Most successful car dealers understand that the best advertising they can
10 have is the last happy and completely satisfied customer they sold or
leased a car to. They will not only come back to conduct business with
11 that dealer themselves, they will often send family members and friends to
this dealership. Often to the same sales person they conducted business
12 with. Customers who have this strong relationship will often drive past a
competitor’s dealership that may be closer or more convenient to do
13
business with their favorite sales person. From this relationship, multiple
14 sales can be built from just one satisfied customer. It is the sales person
and sales experience that created that loyalty.
15
16 (See Exhibit E, Sigmon Rpt., ¶ 28.)
17 69. Dealers’ potential profits and future sales are materially affected by the way in which
18 CbV cuts off dealer access to consumers and limits opportunities for relationship-building. (Exhibit
19 E, Sigmon Rpt., ¶ 14.) Typically, even if a dealership only makes a small profit margin on the sale
20 of a vehicle, where the dealer has formed a positive relationship with the customer, he or she, or his
21 or her friends and family members, will return to that dealership to service and maintain the vehicle.
22 (Id.) Dealerships’ service, parts and body shop departments represent an opportunity for increased
23 revenue and also increased customer interaction. (Id.)
24 70. Similarly, the CbV program “deprives the franchise dealer of important revenue and
25 profit streams” by eliminating the possibility of a customer “trading-in” his or her existing car as
26 part of the transaction to acquire a new car. (Exhibit E, Sigmon Rpt., ¶ 35.) Used car sales are vital
27 to the revenue and profits of a franchise dealer. (Id.) According to NADA, 61 percent of a dealer's
28 used car inventory comes from trade-ins. (Id.) CbV restricts dealers’ access to their primary
22
PETITION
1575432
1 acquisition channel for used cars that typically generate high margin sales, which undoubtedly
2 impacts the dealers’ investment in their franchises. (Id.)
3 71. CbV negatively impacts dealers’ investments in their franchises and represents
4 exactly the type of material change requiring notice to the franchisee and this Board under VC
5 section 3060(b).
6 72. CbV profoundly alters the relationship between manufacturers and dealers, the
7 relationship between dealers and consumers, California dealers’ sales and service obligations, and
8 California dealers’ investments in their franchises. Such changes constitute a franchise modification.
9 Therefore, Volvo was required to give 60 days’ written notice. Volvo failed to give the required
10 notice. Had Volvo given the required notice, dealers would have had the opportunity to consider
11 CbV and to decide whether to file a protest with this Board. Instead, Volvo flouted the VC, this
12 Board, and Volvo’s California dealers.
13 THIRD VIOLATION
14 The Care by Volvo Program Violates VC Section 11713.3(u) by Preferentially Allocating
15 Vehicles and Referring Sales to Dealerships Controlled in Part by Volvo
16 73. California auto manufacturers are prohibited from giving preferential treatment to
17 dealerships controlled by them in whole or in part, whether directly or indirectly. (VC §
18 11713.3(u).)
19 74. Volvo controls, in part, the dealerships that participate in the CbV program. The
20 Addendum regarding CbV admits that CbV is a “special leasing program” through which the dealer,
21 “as a limited agent on behalf of VCFS Auto Leasing Company,” “may sell vehicles to VCFS Auto
22 Leasing Company.” (Exhibit L, Addendum to Dealer Lease Agreement (emphasis added).) Volvo
23 admits that the “[p]urpose of the addendum is to clarify the dealers’ role as agent to VCFS in the
24 lease transaction.” (Id. (emphasis added).) By definition, an agent – the CbV dealer – is controlled
25 by a principal – Volvo. Thus, the CbV dealerships are controlled, in part, by Volvo. And Volvo’s
26 relationship with those dealers is subject to VC section 11713.3(u).
27 75. CbV violates VC section 11713.3(u) by, among other things, furnishing to CbV
28 dealers vehicles that are not made available to non-CbV dealers pursuant to a reasonable allocation
23
PETITION
1575432
1 formula – and effectively directing inventory away from non CbV dealers. 15
2 76. CbV limits non-CbV dealers’ access to certain Volvo cars. Volvo has a shortage of
3 the vehicle models that were offered through CbV, including the much in-demand XC40 SUV. Yet
4 Volvo siphoned as much as 15% of its vehicle inventory away from dealerships it did not control in
5 full or in part and allocated it exclusively to CbV dealerships, which Volvo does control in part. (See
6 Exhibit E, Sigmon Rpt., ¶¶ 39-41.)
7 77. Volvo’s preferential treatment of Volvo-controlled CbV dealerships negatively
8 impacts non-CbV dealerships. Had more cars been allocated to dealers instead of to CbV, dealers
9 would have had “no problem selling or leasing higher allocations of these cars than they actually
10 received in 2018.” (See Exhibit F, Safir Rpt., at p. 12.) “This lack of available inventory denies
11 dealers the ability to maximize their own dealership[’]s unit sales volume, denying them the future
12 capability of ordering inventory quantities that will maximize their sales and profitability.” (Exhibit
13 E, Sigmon Rpt., ¶ 40.) And, “it is fair to assume that for each subscription completed, one less sale
14 or lease of an XC40 would have been made by the dealer during the last 12 months.” (Exhibit F,
15 Safir Rpt., at p. 12.)
16 78. Similarly, Volvo unfairly discriminates in favor of dealerships it controls in part
17 when it assigns prospective purchasers of XC40s and S60s to CbV dealerships rather than to the
18 dealership that corresponds to the area in which the consumer resides.
19 79. Because CbV creates a principal-agent relationship between Volvo and CbV dealers,
20 Volvo controls, at least in part, those dealerships. As such, Volvo violates VC 11713.3(u) when it
21 preferentially allocates in-demand cars and only refers prospective buyers to CbV dealerships.
22 FOURTH VIOLATION
23 The Care by Volvo Program Undermines the Purpose of VC Section 11713.19, which
24 Prohibits Payment Packing
25 80. CbV’s flat monthly rate conceals the actual cost of the CbV vehicle and of bundled
26
27
15
At least one California Volvo dealer has declined to participate in CbV in spite of strong pressure
28 by Volvo to participate.
24
PETITION
1575432
1 services (e.g., insurance, maintenance), and fails to disclose that the costs will vary between CbV
2 subscribers. When CbV customers go to a dealership to pick up their car, they learn, for the first
3 time, the breakdown of costs upon receipt of the CbV contract.
4 81. California law mandates that dealers disclose, prior to contract drafting, all charges
5 for goods or services to be added to a contract for the sale of an automobile. (Veh. Code §
6 11713.19.) VC section 11713.19, the payment packing statute, was enacted to protect consumers
7 from misleading, bundled pricing focused on a monthly fee, rather than the cost of a vehicle. While
8 the payment packing statue only applies to dealers, by offering CbV directly to consumers, Volvo is
9 both acting like a dealer and offering a product that California prohibits dealers from offering 16.
10 82. The VC forbids the addition of charges to a contract for a vehicle lease for “any
11 goods or services … without previous disclosure and consumer consent or [the inflation of] the
12 amount of an installment payment … to disguise the actual charges for goods or services to be
13 added by the dealer to the contract.” (13A Cal. Jur. 3d Consumer, etc. Protection Laws § 404 citing
14 Veh. Code § 11713.19.) “Goods or services” in this context refer to “any type of good or service,
15 including, but not limited to, insurance and service contracts.” (Veh. Code § 11713.19(2)(B).) The
16 practice of lumping fees into a non-delineated monthly payment is commonly referred to as payment
17 or loan “packing” or “loading.” (See Casella v. SouthWest Dealer Services, Inc. (2007) 157
18 Cal.App.4th 1127, 1131 (defining payment packing as the practice of “quoting inflated monthly
19 payment amounts for [ ] cars to customers in order to hide the true cost of aftermarket products,
20 thereby facilitating the sale of such products.”); see also Exhibit F, Safir Rpt., at p. 8 (Payment
21 packing “is the process of adding more than the actual cost of a lease into the lease terms without
22 disclosing the cost of these items to that they can be taken out of the deal by consumers.”).)
23 83. CbV is advertised as “[o]ne flat monthly rate with no surprises.” (See Exhibit J, Care
24 by Volvo FAQs, available at https://www.volvocars.com/us/shopping-tools/purchase/care-by-
25 volvo.) It includes: a new vehicle, “premium” Liberty Mutual insurance, service and maintenance
26
16
27 This is a further example of how CbV constitutes unlawful competition between manufacturer
and dealer. Dealers cannot compete with CbV because they are effectively prohibited by law from
28 making a comparable offer.
25
PETITION
1575432
1 including excess wear and tear, and access to a 24/7 Volvo Concierge. (Id.)
2 84. CbV does not disclose the cost for the new vehicle. CbV does not disclose the cost
3 for the Liberty Mutual insurance. CbV does not disclose the cost for service and maintenance or
4 excess wear and tear. And CbV does not disclose the cost for access to a 24/7 Volvo Concierge.
5 85. CbV consumers cannot price compare because they do not know the actual price of
6 the car or the bundled services until they receive the final contract when they go to pick up the CbV
7 car from the dealership. (See Exhibit E, Sigmon Rpt., ¶¶ 24-25.) If a buyer does not know the terms
8 of a monthly payment, he or she has no basis for computing the actual offering price of the car and
9 the included after-market products (in this case, insurance, maintenance, etc.). This is particularly
10 true where the capitalized cost of the car is not even calculated by Volvo until the consumer has
11 already filled out paperwork and begun the purchase process.
12 86. In CbV, even Volvo does not know what the actual cost of the car is to each
13 consumer until it has sought approval by Liberty Mutual and determined the cost of the insurance
14 premium. Despite the “flat monthly rate,” the costs of the included goods and services necessarily
15 vary between consumers because Liberty Mutual charges a different insurance rate depending upon
16 each CbV customer’s individual driving record. Volvo must then “work backwards” to manipulate
17 the capitalized cost for each CbV vehicle and the costs for the add-on services to ensure the numbers
18 tally up to the quoted monthly rate. Volvo necessarily builds a cushion (known as “leg”) into the
19 CbV monthly rate to account for the variability of insurance premiums regardless of whether a
20 customer has a spotty driving record resulting in a high insurance premium. Customers who are less
21 expensive to insure pay more for their Volvo vehicle. None of this is disclosed to consumers.
22 87. As such, CbV frustrates the purpose of the payment packing statute. Were a dealer to
23 advertise and offer CbV’s “flat monthly rate” pricing scheme, it would run afoul of VC section
24 11713.19. Volvo subverts this consumer protection law by writing itself around it as a manufacturer
25 acting like, but not licensed as, a dealer.
26 88. Volvo should not be allowed to flout the payment packing statute by taking over the
27 dealer’s role without also absorbing the dealer’s responsibilities.
28
26
PETITION
1575432
1 Conclusion
2 89. CbV interferes with the role of dealers in violation of both the VC and the spirit of
3 the franchise system. It negatively impacts the economics of Volvo dealerships. And the way the
4 program is bundled and priced violates the anti-payment packing statute.
5 WHEREFORE,CNCDA prays as follows:
6 Request for Relief
7 90. CNCDA requests that the Board itself, both public and dealer members, exercise its
s statutory oversight responsibility by considering the acts and practices of Volvo relating to CbV as
9 they are described in this Petition and as they relate to the Legislature's statutory scheme to ensure
10 fair competition and to protect the public. CNCDA respectfully requests:
i. That the Board provides relief available under VC section 3050(c)(1) by
_, 12 directing DMV to conduct an investigation of the matters described herein, and to make a written
13 report on the results of the investigation to the board within 90 days of the date of the Board's order
v ~4 that the DMV investigate, or
~ 15 ii. That the Board provides relief available under VC section 3050(c)(3) by
t"~
t~ ordering the DMV to exercise its authority and power to initiate disciplinary proceedings against the
17 motor vehicle manufacturer license of Volvo (License No. 49551); and
18 iii. That the Board provides such further relief as the Board deems necessary and
19 appropriate.
20 DATED: January 15, 2019 Respectfully submitted,
21 GLAS EIL FINK HOWARD

AVCHE & SHAPIRO~,,~,P
22
23
MICHAEL CYPERS
24 JULIE R. F. GERCHIK
LAUREN H. BRAGIN
25 Attorneys for Petitioner
CALIFORNIA NEW CAR DEALERS
26
27
28
27
PETITION
1575432
EXHIBIT A
EXHIBIT B
Organisation Document type
Volvo Car USA Informational
Document name Version Date Page
Care by Volvo Announcement Retailers 1 2017-11-22 1 (4)
Issuer (Dept., name, CDS-id) Reg. No. Security class
Jim Nichols, VCUSA Corp. Communications Proprietary
This document is for Volvo field representatives and retailers only.

DO NOT forward this document to customers, journalists or the general public
Care by Volvo Launches in the United States on November 29, 2017
Volvo Car USA (VCUSA) is introducing Care by Volvo, a simple, negotiation-free way to own, enjoy
and upgrade to a new Volvo. This method is in addition to traditional vehicle purchasing and leasing,
offering customers a short-term commitment to a new car with all costs included in one flat rate. For
the first time, maintenance, car insurance, wear-and-tear, protection plans and the cost for the vehicle
itself will be rolled into one, easy, nationally based monthly rate. Customers will sign up for a two-year
subscription. There will be an option for customers to change cars and sign up for a new 24-month
subscription as early as 12 months into their agreement. Care by Volvo comes at a time when
consumers expect and enjoy subscriptions for a variety of products and services. This is part of
Volvo’s vision to make life less complicated for customers.
Advantages for Volvo Retailers:
Care by Volvo will provide the following advantages to retailers:

 Increased throughput of vehicles
 Attract new customer segments to Volvo brand
 Consistent 8% margin (subject to qualification as per any wholesaled vehicle) more often than
average, traditional transactional methods
What the Customer Experiences
Vehicle Selection & Ordering Stage

The customer can start one of two ways, either via the Care by Volvo landing page on the Volvo Cars
website or via the “build and price” section of the Volvo Cars configurator. No matter which way the
customer arrives at the Care by Volvo area, they will be informed about the benefits of the program.
Customers will be presented two preconfigured XC40 selections. They will have the option to choose
the interior and exterior color. After submitting their personal contact information and a credit card for a
$500 deposit, the customer will see a confirmation screen.
Verification Stage
The customer will be contacted by a VCUSA-based Volvo Concierge to confirm their order and also
guide them through the process to complete their online credit application and insurance enrollment
with Liberty Mutual.
Coordination Stage
The Volvo Concierge will serve as the liaison between the customer, VCUSA and the retailer. After
confirming the order, the Volvo Concierge will allocate the desired vehicle from port stock and arrange
delivery to the customer’s retailer. Afterward, the Concierge will coordinate a time and date between
the retailer and the customer for delivery.
Delivery Stage
The delivery of the XC40 via Care by Volvo will be the same as any other Volvo, whether purchased or
leased. The retailer staff will assist the customer in becoming familiar with the vehicle and answer any
product related questions. Additional details regarding Care by Volvo specific paperwork will be
covered by a training program to be implemented in Q1 2018, several months before the first Care by
Volvo deliveries will occur.
Retailer Selection
Retailers are recommended to customers based on their ZIP code. This is the same system that
recommends retailers on the Volvo Cars configurator. Customers will have the opportunity to select a
different retailer if they wish.
What is Included in Care by Volvo
In addition to the vehicle payment, Care by Volvo also provides the following in one flat rate:
 Vehicle Maintenance including wearable items like wipers and brakes for the duration of the
subscription
 A premium personal auto insurance policy provided by Liberty Mutual
 Protection of tires and wheels related to road hazards
 When it’s time to return the vehicle, coverage for excess wear and usage up to $1,000 (i.e.:
dents and dings to body panels)
 24/7 dedicated Volvo customer care and concierge services, including roadside assistance
 Volvo OnCall Subscription
 Mileage allowance up to 15,000 miles per year
 A 24-month subscription term
 Flexibility to upgrade to a different car between 12 and 24 months into the original agreement,
resetting to a new 24-month subscription with a new subscription price.
Margins, Commissions & Other Financial Support
Sales Margin
The margin qualification for Care by Volvo is the same for any wholesaled vehicle. As a result, 8%
behind the line margin is paid to the dealer in the same way as any car subject to the same
qualifications (i.e.: CSI, Volvo 360, etc.)
New Car Profit Impact

Care by Volvo offers retailers the ability to make an 8% margin more often than a slightly higher
percentage on a traditional sale or lease. For example, if the Care by Volvo customer opts to upgrade
their vehicle every 12 months, the retailer would realize an 8% margin three times over a 36-month
period. This is a greater dollar amount than the slightly larger percentage that could be earned over
the same period in a traditional lease or sale.
Care by Volvo is expected to bring new customers to the Volvo brand, so the potential for incremental
revenue and throughput is seen as a potential positive impact on revenue.
Facility/Floorplan Support
Since vehicles will be allocated from port stock, there will be minimal time that the vehicle resides at
the retailer. The goal of the Volvo Concierge is to coordinate the arrival time of both the car and the
customer to minimize the time the car is idle on the lot. As a result, there is no floorplan support.
F&I
Care by Volvo customers will have selected all of their options before arriving at the retailer and the
subscription is all inclusive of service, maintenance and insurance. As a result, there are no additional
services that can be added to the Care by Volvo subscription.
Trade Ins
Care by Volvo is a zero-down program. There is no way for a trade in to be factored into the Care by
Volvo subscription. The retailer has the opportunity to acquire a trade in as a separate transaction.
During the Verification stage with a Volvo Concierge, the customer will be asked if they wish to trade in
a vehicle. That information will be passed to the retailer for follow-up. The customer is free to choose
how they will dispose of their current vehicle (i.e.: either through a competitive dealer process, private
sale, etc.).
Insurance
Insurance is included in the Care by Volvo subscription and is provided by Liberty Mutual. Due to state
regulations, all customer questions regarding insurance MUST be answered by Liberty Mutual. State
insurance licensing rules prohibit Volvo Cars and retailers from representing insurance coverage.
For your information, the insurance policy included in Care by Volvo includes the following:
 Bodily Injury Liability: $250,000 per person; $500,000 per accident
 Property Damage Liability: $100,000
 Comprehensive: $500 Deductible
 Collision: $500 Deductible
 Underinsured/Uninsured Motorist: $250,000 per person; $500,000 per accident
 Medical Payments: $5,000
If customers have any questions about the auto insurance coverage included in Care by Volvo, they
can contact Liberty Mutual Insurance via the below:
CarebyVolvo@LibertyMutual.com
www.libertymutual.com/CarebyVolvo (Active on November 29)
Vehicle Selection
Customers will have a choice between the below pre-configured vehicles. They will have the chance to
choose exterior and interior colors.
 XC40 T5 AWD Momentum with Premium Package, Vision Package, Heated Front Seats and
Heated Steering Wheel, Panoramic Roof and 19” Black Diamond Cut Wheel
 XC40 T5 AWD R-Design with Premium Package, Vision Package, Advanced Package,
Heated Front Seats and Heated Steering Wheel, Panoramic Roof, Harman Kardon Premium
Sound and 20” 5-Double Spoke Matte Diamond Cut Wheel
Inventory
Care by Volvo vehicles will be allocated from port stock upon selection. As a result, every Care by
Volvo purchase can be considered an incremental sale and will not impact your vehicle allocation. At
this time, customers will not be able to select an exact car from retailer stock and subscribe to it via
Care by Volvo. As the program matures, VCUSA will evaluate opening Care by Volvo across
additional models and inventory.
Vehicle Upgrading During Subscription Term
Customers will be contacted via Volvo Concierge on their one-year anniversary, notifying them about
their upgrade/vehicle change eligibility. If a customer chooses to change their vehicle between 12 and
24 months into their agreement, the 24-month term will reset upon delivery of their new car. The
customer will be charged the subscription rates that are valid at the time of the change as Care by
Volvo rates are not grandfathered.
The upgrade and subscription renewal process follows the same steps as a new
subscriber as explained above.
Subscription Expiration
Customers will be required to return their vehicle after 24 months. The customer can choose to either
purchase the car, resubscribe to Care by Volvo or simply return the car. VCUSA is providing a $1,000
damage waiver to the customer upon returning the car.
Vehicle Disposition
VCUSA will have more information about retailer opportunities regarding returned Care by Volvo
vehicles in the future.
Pricing
Pricing will be announced at the LA Auto Show on November 29, 2017.
Marketing Support
Retailers will have the opportunity to market Care by Volvo on DDC websites. Banners will be
provided to support those efforts.
Training
A live webinar will be scheduled during the week of December 4th to educate and train salespeople on
the Care by Volvo program. For those unable to attend the live session, a recording will be available
via VRC2 and the Volvo Cars training site.
We encourage all retailer personnel to visit the Care by Volvo page on volvocars.com/us on November
29th to learn more about the program, where a customer-facing FAQ will detail many aspects of the
program.
EXHIBIT C
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EXHIBIT D
April 6, 2018 Re: Care by Volvo
Brian Maas, President

California New Car Dealers Association
1517 L Street
Sacramento, California, 95814
By email to bmaas@cncda.org
Dear Mr. Maas:
Thank you for your letter dated March 29, 2018.
I am pleased to respond to your concerns on our Care by Volvo program. The program provides Volvo and our retailers
with a great opportunity and I want to first share some key facts with you.
1. We are seeing good customer interest in Care by Volvo. We have over 1,000 orders to date.
2. Of those 1,000 plus orders, 25% are from customers in California. Our first Care by Volvo customer is from
California and he has become a friend of Volvo and an advocate of the program, including speaking at our
recent Volvo Retailer Conference.
3. We are pleased that 92% of the orders are from conquest customers. Incremental business and new
customers for our retailers. Similarly, 46% of the orders are from customers in the 18 to 35 age range, a
customer group that Volvo has been less successful in attracting to our brand in the past.
4. We have been talking to our retailer network about Care by Volvo (including through our retailer advisory
group) since last August. Our retailers were initially cautious about the program and, while we still have
questions and details to work through, they have come around to the program and are generally becoming
more and more enthusiastic about it. We have not had any other challenge to the program.
5. Care by Volvo is not intended to replace the other, more traditional sales channels such as purchase, finance
or lease. It is an additional sales channel to those other options and we expect Care by Volvo sales to be a
small percentage of our total sales.
I have been in the United States for 6 months now and I have made clear that working with our retailer partners to
improve their profitability is my priority. Our network had a 1.5% return on sales in 2017 and we want to work with
them to get them to 3%. I believe that Care by Volvo can contribute to this. It will not only bring new customers and
incremental sales to our retailers, but retain other service revenues in our network.
VOLVO CAR USA, LLC

1 Volvo Drive
Rockleigh, NJ 07647
Telephone: +1-201-768-7300
volvocars.us
I hope retailers can see the great opportunities Care by Volvo brings and embrace the program. I want to work in
partnership with our retailers on this and I specifically addressed this in a full page ad in Automotive News on March,
26th. I would much prefer to focus on those business opportunities rather than exchanging legal letters and debating
legal interpretations, but I can assure you that we considered all legal issues when putting the program together.
I will try to respond at a high level on the legal concerns you raise.
Unlawful competition
We do not view the Care by Volvo program as competing with our retailers. Rather, it is another sales channel that
the retailer facilitates. All Care by Volvo sales go through our retailer network. The car is allocated to the retailer and
the customer takes delivery of the car at the dealership. All servicing of the car may also be performed at the retailer.
Coercion of retailers into taking delivery
Under the Care by Volvo program, the allocated cars are all pre-sold to a customer. I therefore do not understand
your concern as there would be no reason for the retailer to reject a pre-sold car. Regardless, should the retailer still
choose to reject delivery of a specific Care by Volvo car for any reason, they would have the right to request this by
contacting our regional office. Cars under Care by Volvo would not be released to the retailers until a delivery has
been confirmed by both the customer and the retailer representative. Please note cars sold under the Care by Volvo
program are allocated incrementally to standard allocations so these sales do not reduce retailers’ sales in the
traditional channels.
Violation of consumer protection laws
The lease agreement for the Care by Volvo Program is being provided by our financial services company, Volvo Car
Financial Services. It will comply with all Federal and State laws applicable to consumer motor vehicle lease contract
disclosures, including the California Single Document Rule.
Thank you again for writing to me and raising your concerns. Care by Volvo is a new and innovative offering and I
understand that retailers will have questions and concerns and want to see how it works out. I hope that this letter
provides some reassurance. My team would be very pleased to join a call or a meeting with you or your retailers if
you feel that would be helpful. Otherwise we can provide you with any further information you might need.
Yours sincerely,
Anders Gustafsson
SVP Americas and President & CEO Volvo Car USA
Copied by email to:

Mike Cottone, Vice President Western Region
Adam Clarke, Head of Network Development, Americas
Peter Wexler, Director Mobility Solutions
Calilornia New Car Dealets Association
April 13,2018
VIA FEDERAL EXPRESS AND EMAIL
Anders Gustafsson
Senior Vice President Americas
Volvo Car Corporation
I Volvo Drive
Rockleigh, NJ 07647
Re: Response to April 6 letter on Care by Volvo
Dear Mr. Gustafsson:
Thank you for your letter dated April 6,2018.
We appreciate that you and your colleagues at Volvo promptly responded to CNCDA's
March 29, 2018 letter, which describes some of our preliminary concems with the Care by Volvo
program. In particular, we are grateful that following receipt ofour letter, Volvo extended to April 23
the deadline for dealers to review and approve the addendum to the VCFS Dealer Lease Agreement
(the "Addendum"). We've also welcomed the opportunity to discuss this program with Peter Wexler.
who is overseeing the Care by Volvo program in the United States.
Although we appreciate your prompt response to our original letter, the underlying issues
identified in CNCDA's March 29 letter have not yet been addressed by Volvo. Specifically, your
April 6 letter does not substantively explain why Care by Volvo does not violate the Califomia
Vehicle Code (CVC) prohibitions on factory competition (CVC $ I1713.3(o)) and coercive vehicle
deliveries (CVC $ I I 713.2(a)). Please provide substantive resoonses on these issues no later than
April 23.20[8 so that we may share vour respon ses with o urC alifornia Volvo dealer members ll'l
advance ofthe Care bv Volvo deadline,
We also have not received adequate assurances regarding dealer compliance with California
consumer protection laws (e.g., the Single Document Rule). In light ofthe novelty ofthe Care by
Volvo program and the burdens placed upon dealers for its implementation, we ask that Volvo fully
indemnify its dealers for any claims that arise from the dealers' role in the Care by Volvo program.
Please advise as to whether vou will orovide such indemnification no later than A D ril 23-2018.
Since our March 29letter, we have also become aware ofother potential issues with the Care by
Volvo program. These issues include:
l. Care by Volvo constitutes a franchise modification, which requires notice and would be
protestable to the Califomia New Motor Vehicle Board by Volvo dealers. (CVC $ 3060.)
15'17 L Street, Sacramento, Calilornia 95814 office 916.441.2599 fax 916.441.5612 wwwcncda.org
Anders Gustafsson
April 13,2018
Page 2
2. Significant aspects regarding the implementation of Care by Volvo are not identified by the
Addendum. For example, how are vehicle trade-ins handled? May a dealer offer altemative
lease arrangements or sales options to Care by Volvo customers?
3. Are dealers guaranteed an 8% margin during the life ofthe Care by Volvo program?
4. If Volvo changes the margin, or any other aspect of the Care by Volvo program, may dealers
elect to no longer participate in the Care by Volvo program without penalty?
5. May a Volvo dealer choose to not participate in Care by Volvo?
6. What consequences (ifany) will a Volvo dealer face ifthey choose to not participate in Care
by Volvo?
We are particularly concemed that Volvo is forcing or coercing its dealers to participate in
this program. For example, it is our understanding Volvo is pressuring all of its dealers to approve
the Addendum on or before April 23 because Volvo intends to begin delivery ofCare by Volvo
vehicles to dealerships at the end of this month. In other words, it appears that dealers will be
receiving Care by Volvo vehicles regardless ofwhether they want to participate in the Care by Volvo
program. We hope this is not the case. Regardless, in light of the impending implementation olthe
Care by Volvo program, ent io es no later
April 23.2018.
Thank you again for promptly responding to CNCDA's March 29 letter. We look forward to
continuing our dialog with Volvo on this matter, and to promptly resolving the above-mentioned
issues for our Volvo dealer members. Please do not hesitate to contact me at9l6-441-2599 any time.
Sincerel
Br
Pre
cc: Adam Clarke, USA Chief Legal Officer, Volvo Car Corporation
Peter Wexler, Director of Mobility Solutions, Volvo Car Corporation
John Sackrison, Orange County Automobile Dealers Association
Dean Mansfield, New Car Dealers Association of San Diego
Todd Leutheuser, Southland Motor Car Dealers Association
Bob Smith, Greater Los Angeles New Car Dealers Association
Steve Smith, Silicon Valley Auto Dealers Association
Stacey Castle, Greater Sacramento New Car Dealers Association
All CNCDA Volvo Dealers
May 1, 2018
Anders Gustafsson
1 Volvo Drive
Rockleigh, NJ 07647
Re: Care by Volvo

Thank you for flying to CNCDA ' s headquarters in Sacramento last Thursday to meet
with California Volvo dealers on the Care by Volvo (CbV) program. We greatly appreciated the
opportunity to discuss this program with you and other senior members of Volvo USA' s
leadership team. Your eagerness to engage California's Volvo dealers is laudable.
At our Thursday, April 26 meeting, we were encouraged by Volvo leadership's statement

that Volvo dealers that receive CbV vehicle allocations are free to use such vehicles in traditional
sale or lease transactions. In other words, Volvo dealers will be empowered to match customers
with the purchase option that works best for them, regardless of whether it may be a traditional
lease, sale, or CbV subscription. For example, a dealer may direct a CbV customer to a
traditional lease if the customer wants to incorporate the value of their trade-in in their monthly
payments (Cb V does not alter monthly payments based on vehicle trade-in value). This promised
dealer flexibility will benefit California customers, and it mitigates some of our concerns
regarding illegal competition, which were articulated in our pervious letters.
While we were heartened to learn about the promised autonomy of Volvo dealers in the
CbV program, CNCDA remains concerned regarding numerous issues involving compliance
with California and Federal law. These concerns include the following:
1. Volvo's advertisements and representations that CbV vehicles are "new" may violate
California law. The Vehicle Code prohibits manufacturers and dealers from advertising
or representing a vehicle as a "new vehicle if the vehicle is a used vehicle." (Cal. Vehicle
Code section 117l3(d).) A sale by a Volvo dealer to Volvo Car Financial Services,
which is part of the Cb V process, would likely make the vehicle a " used vehicle" for the
purposes of the Vehicle Code. (Cal. Vehicle Code section 665.)
1517 L Street. Sacramento. Cal ifornia 95814 office 916.441.2599 fax 916.441 .5612 www.cncda.org
Anders Gustafsson
May 1,2018
Page 2
2. Statements made by Volvo in CbV advertisements on customer "down payments" creates

exposure under Federal Regulation M and the California Civil Code. Advertisements that
Cb V involves "zero down payment" are potentially misleading, as the term "down
payment" is used in finance offers and not lease programs. Federal Regulation M and the
California Civil Code require dealers to advertise the total amount due at signing.
Moreover, a statement that there is "zero down payment" is problematic because the Cb V
program requires customers to make a $500 deposit, which is applied to the monies due
at lease inception.
3. Advertisements on Volvo's website on the price ofa CbV lease "subscription" do not
appear to clearly and conspicuously explain that "tax and license" are added to the $600
and $700 monthly payments. This potentially violates both Federal and California law.
4. By bundling insurance into the lease payments, the "agreed upon value at lease signing"
becomes veritable. Under this bundled payment system, customers with low insurance
rates based on their age, driving record, domicile, etc. will pay a higher "agreed upon
value of vehicle at lease signing" than those with higher insurance premiums to arrive at
the "same" monthly payment. Put differently, if a Cb V customer is a low-risk driver, the
value of the customer's vehicle must artificially increase for the customer to receive the
same monthly payments as higher risk drivers.
5. The variability of the "agreed upon value at lease signing" could give rise to civil claims
based upon "payment packing." Though Volvo uses the term "bundle," plaintiff attorneys
may take the position that the insurance is "packed" into the program. To arrive at a fixed
$600 or $700 (plus taxes and fees) monthly payment, both Volvo and Liberty Mutual (the
required insurance carrier for CbV) likely created an "average customer insurance
profile." Civil attorneys could attack this profile contending that Volvo and Liberty
Mutual created a system where lease payments are quoted on an "inflated average" value
resulting in potentially half the public paying a higher base lease payment (payment
before insurance) than others.
6. It is unclear what happens if a customer's insurance status changes during the CbV lease
term and Liberty Mutual refuses to insure the driver. The gross capitalized cost of the
value includes two years of insurance premiums to match the CbV lease term . Is a
customer's monthly payment lowered if the customer is unable to obtain insurance
through Liberty Mutual, but successfully becomes insured through other means?
Given these ongoing compliance concerns, we would like to remind Volvo of its
obligation to indemnifY its dealers for claims that arise out of the implementation of the CbV
program. During our meeting last week, we were heartened to learn that Volvo intends to fully
indemnify its dealers in actions involving the CbV program. If our understanding is incorrect,
please advise us (and your California Volvo dealers) so that we may plan accordingly.
Anders Gustafsson
May 1,2018
Page 3
Thank you again for taking the time to meet at CNCDA's headquarters on Thursday,
April 26. Your enthusiasm, candor, and engagement of the California Volvo dealers is greatly
appreciated. Should you have any questions or comments on this letter, do not hesitate to contact
me at 916-441-2599 any time.
Sincerely,
Brian Maas
President
June 13,2018
Anders Gustafsson
1 Volvo Drive
Rockleigh, NJ 07647
Re: Care by Volvo
This is our fourth letter sent in the past three months related to the Care by Volvo (Cb V)
program. Unfortunately, today we are writing to express frustration and alarm on behalf of our
member dealers that Volvo appears to have launched CbV without addressing any of the
compliance concerns articulated in our May 1 letter. As you know, these concerns include:
• Volvo appears to be manipulating the value of Cb V vehicles to adjust for the veritable
cost of insurance. This may violate California and Federal laws that regulate
"payment packing" and require the disclosure of the value of the vehicle at lease
inception.
• Volvo is not clearly and conspicuously disclosing that the Cb V monthly payments of
$600 and $700 do not include taxes and fees . This also may violate California and
Federal law.
• Volvo is deceptively advertising that CbV vehicles involve no "down payments," as
the program requires customers to make a $500 deposit, which is applied to monies
due at lease inception. This may violate California and Federal law.
• Volvo is illegally advertising CbV vehicles as "new." This likely violates California
law, since the vehicles likely qualify as "used" once Volvo Car Financial Services
purchases the vehicle from the dealer
These compliance concerns are more specifically set forth in our May 1 letter, which is
attached to this communication for reference. To date, not only have we not received a response
from Volvo regarding the concerns raised in our May 1 letter, we also have not received
confirmation that California dealers will be indemnified by Volvo in potential consumer lawsuits
involving CbV.
1517 L Street, Sacramento, California 95814 office 916.441.2599 fax 916.441.5612 www. cncda.org
Anders Gustafsson
June 13 , 2018
Page 2
Given these ongoing compliance concerns, we ask that Volvo:
1. Provide a response to each of the six issues numbered in our May 1 letter as soon as
possible.
2. Answer the question regarding whether Volvo will indemnify its California dealers
for claims regarding the implementation of the Cb V program.
3. Provide documentation related to the implementation of the CbV program, including
the Cb V lease agreement.
We ask that you provide a response to this letter no later than July 1,2018.
Should you have any questions or comments on this letter, do not hesitate to contact me
at 916-441-2599 any time.
Sincerely,
Enc: CNCDA letter Re: Care by Volvo, May 1, 2018

May 1, 2018
Anders Gustafsson
1 Volvo Drive
Rockleigh, NJ 07647
Re: Care by Volvo

Thank you for flying to CNCDA ' s headquarters in Sacramento last Thursday to meet
with California Volvo dealers on the Care by Volvo (CbV) program. We greatly appreciated the
opportunity to discuss this program with you and other senior members of Volvo USA' s
leadership team. Your eagerness to engage California's Volvo dealers is laudable.
At our Thursday, April 26 meeting, we were encouraged by Volvo leadership's statement

that Volvo dealers that receive CbV vehicle allocations are free to use such vehicles in traditional
sale or lease transactions. In other words, Volvo dealers will be empowered to match customers
with the purchase option that works best for them, regardless of whether it may be a traditional
lease, sale, or CbV subscription. For example, a dealer may direct a CbV customer to a
traditional lease if the customer wants to incorporate the value of their trade-in in their monthly
payments (Cb V does not alter monthly payments based on vehicle trade-in value). This promised
dealer flexibility will benefit California customers, and it mitigates some of our concerns
regarding illegal competition, which were articulated in our pervious letters.
While we were heartened to learn about the promised autonomy of Volvo dealers in the
CbV program, CNCDA remains concerned regarding numerous issues involving compliance
with California and Federal law. These concerns include the following:
1. Volvo's advertisements and representations that CbV vehicles are "new" may violate
California law. The Vehicle Code prohibits manufacturers and dealers from advertising
or representing a vehicle as a "new vehicle if the vehicle is a used vehicle." (Cal. Vehicle
Code section 117l3(d).) A sale by a Volvo dealer to Volvo Car Financial Services,
which is part of the Cb V process, would likely make the vehicle a " used vehicle" for the
purposes of the Vehicle Code. (Cal. Vehicle Code section 665.)
1517 L Street. Sacramento. Cal ifornia 95814 office 916.441.2599 fax 916.441 .5612 www.cncda.org
Anders Gustafsson
May 1,2018
Page 2
2. Statements made by Volvo in CbV advertisements on customer "down payments" creates

exposure under Federal Regulation M and the California Civil Code. Advertisements that
Cb V involves "zero down payment" are potentially misleading, as the term "down
payment" is used in finance offers and not lease programs. Federal Regulation M and the
California Civil Code require dealers to advertise the total amount due at signing.
Moreover, a statement that there is "zero down payment" is problematic because the Cb V
program requires customers to make a $500 deposit, which is applied to the monies due
at lease inception.
3. Advertisements on Volvo's website on the price ofa CbV lease "subscription" do not
appear to clearly and conspicuously explain that "tax and license" are added to the $600
and $700 monthly payments. This potentially violates both Federal and California law.
4. By bundling insurance into the lease payments, the "agreed upon value at lease signing"
becomes veritable. Under this bundled payment system, customers with low insurance
rates based on their age, driving record, domicile, etc. will pay a higher "agreed upon
value of vehicle at lease signing" than those with higher insurance premiums to arrive at
the "same" monthly payment. Put differently, if a Cb V customer is a low-risk driver, the
value of the customer's vehicle must artificially increase for the customer to receive the
same monthly payments as higher risk drivers.
5. The variability of the "agreed upon value at lease signing" could give rise to civil claims
based upon "payment packing." Though Volvo uses the term "bundle," plaintiff attorneys
may take the position that the insurance is "packed" into the program. To arrive at a fixed
$600 or $700 (plus taxes and fees) monthly payment, both Volvo and Liberty Mutual (the
required insurance carrier for CbV) likely created an "average customer insurance
profile." Civil attorneys could attack this profile contending that Volvo and Liberty
Mutual created a system where lease payments are quoted on an "inflated average" value
resulting in potentially half the public paying a higher base lease payment (payment
before insurance) than others.
6. It is unclear what happens if a customer's insurance status changes during the CbV lease
term and Liberty Mutual refuses to insure the driver. The gross capitalized cost of the
value includes two years of insurance premiums to match the CbV lease term . Is a
customer's monthly payment lowered if the customer is unable to obtain insurance
through Liberty Mutual, but successfully becomes insured through other means?
Given these ongoing compliance concerns, we would like to remind Volvo of its
obligation to indemnifY its dealers for claims that arise out of the implementation of the CbV
program. During our meeting last week, we were heartened to learn that Volvo intends to fully
indemnify its dealers in actions involving the CbV program. If our understanding is incorrect,
please advise us (and your California Volvo dealers) so that we may plan accordingly.
Anders Gustafsson
May 1,2018
Page 3
Thank you again for taking the time to meet at CNCDA's headquarters on Thursday,
April 26. Your enthusiasm, candor, and engagement of the California Volvo dealers is greatly
appreciated. Should you have any questions or comments on this letter, do not hesitate to contact
me at 916-441-2599 any time.
Sincerely,
Brian Maas
President
July 2, 2018
Brian Maas
President, CNCDA
1517 L Street
Sacramento, California 95814
Re: Care by Volvo
Dear Mr. Maas:
Thank you for your letter dated June 13. Earlier this month we did start the process to deliver vehicles to Care
by Volvo (CbV) customers together with our Volvo Retailers in California, all of whom have advised us that they
want to participate in the Care by Volvo program.
We have addressed the issues you brought up during our meeting, and in your May 1 letter, which was one of
the reasons we delayed the start of the CbV program in California. In addition, we understood from your letter
and subsequent discussion with Anthony Bento that CNCDA was not specifically requesting a written response
to your May 1 letter. If this was a misunderstanding, then we apologize.
With regard to the concerns set forth in your May 1 and June 13 letters we provide the following responses:
 As we have discussed, CbV is a unique and different offer and we have thoroughly vetted the concerns
you raised in your May 1 letter around legal implications of including insurance in the lease with our
insurance provider and outside counsel prior to program launch.
 The insurance premium and agreed upon value of the vehicle are separately disclosed in the
itemization of the capitalized cost in our CbV lease agreement in accordance with the California
Vehicle Leasing Act, Section 2985.8(c)(2).
 We are familiar with Federal Regulation M lease advertising disclosure requirements and we properly
disclose that taxes, license and registration fees are excluded from the advertised monthly lease
payment.
VOLVO CAR USA, LLC

1 Volvo Drive
Rockleigh, NJ 07647
Telephone: +1-201-768-7300
volvocars.us
 We do not use the words “no down payment” in our CbV advertising in the US. Please keep in mind
that CbV is currently also offered in Europe and as a result, our European websites and press releases
occasionally are picked up by US media.
 Care by Volvo vehicles are not being advertised as “new vehicles” (i.e. new vs. used representation). It
is possible that Volvo refers to the XC40 as a “new Volvo model”, meaning the XC40 is a new model to
the Volvo line-up. With respect to the representation of the leased vehicle on the California CbV lease
agreement, the description is “2019 Volvo XC40”.
 Our CbV lease agreement addresses changes in the customer’s insurance status.
Your request for indemnification has been noted. Volvo will review any potential consumer claim based on its
individual merits. For example, if there is a customer claim against a Volvo Retailer in California based upon an
allegation that the CbV lease agreement or advertising did not comply with Federal Regulation M or the
California Leasing Act it would be our intention to indemnify the California Retailer for that claim.
As noted during our meeting, we will discuss providing you with further documentation (e.g. CbV lease
agreement) subject to your execution of a standard non-disclosure agreement.
Thank you for the opportunity to respond to your inquiries. If you have any further questions, please do not
hesitate to contact me.
Best regards,
Anders Gustafsson
SVP Americas, and
President & CEO Volvo Car USA
cc: Peter Wexler

Adam Clarke
November 30, 2018
VIA MAIL AND EMAIL

Anders Gustafsson
Chief Executive Officer
Volvo Car USA
1 Volvo Drive
Rockleigh, NJ 07647
Re: Care by Volvo
This is our fifth letter regarding the Care by Volvo (CbV) program. As you know, the CbV
"subscription" program involves Volvo directly leasing vehicles to customers for a 24-month period.
Volvo launched CbV nationwide in early 2018, with little involvement from state or federal
regulators. Volvo's nationwide launch of CbV stands in stark contrast to the vehicle subscription
programs designed by many other manufacturers, who have launched regional test programs in
consultation with state regulators and local dealers.
In our last four letters, we explained that our Volvo dealer members are concerned that CbV
violates various California franchise and consumer protection laws. For example, our March 29,
2018 letter explains that Volvo is directly competing with its dealers through the CbV program in
violation of California law. Our May I, 2018 Jetter explains that the variability of the pricing of CbV
vehicles may constitute illegal "payment packing."
While we appreciate your willingness to engage with your California dealers,1 we have not
received satisfactory responses to many of our most significant concerns. Specifically, the following
significant issues remain unaddressed :
1. Volvo is illegally competing with its dealers. Subdivision (o) of California Vehicle Code
(CVC) section 11713.3 prohibits manufactures from competing with their franchised
dealers. Moreover, many dealers find CbV particularly problematic because they cannot
compete with the monthly prices of CbV - CbV leases often value the vehicle at an
amount far below a dealer's actual cost. By illegally competing with its franchisees,
Volvo undermines its independent dealers, who in the aggregate have invested tens of
millions of dollars on facilities, equipment, and training to build the Volvo brand and
create and build relationships with customers.
2. Volvo illegally modified its dealer franchise agreements. Through Volvo's finance
company, CbV leases vehicles directly to customers. In a CbV transaction, a dealer is
1 CNCDA acknowledges Volvo' s willingness to engage with its California dealers by attending a meeting on CbV
on April 26, 2018 at CNCDA's headquarters in Sacramento. Volvo also provided two written responses to our
letters. However, Volvo' s responses do not adequately address our concerns.
1517 L Street. Sacramento. California 95814 office 916.441 .2599 fax 916.441 .5612 www.cncda.org
Anders Gustafsson
November 30, 2018
Page 2
reduced to acting as an agent of the manufacturer. This represents a fundamental change

to Volvo's business relationship with its franchisees who, as noted above, have invested
enormous effort and financial resources on facilities, equipment and training to represent
the Volvo brand. As such, prior to launching the CbV program, Volvo should have
notified its dealers that it was modifying its franchise agreements in accordance with
California law. It is our understanding that no such notice was provided. We believe this
violates subdivision (I) of CVC Section 11713 .3, and subdivision (b) of CVC Section
3060. We would appreciate confirmation if such a notice to dealers was given.
3. CbV involves price manipulation that implicates important consumer protections. A CbV
lease includes insurance, maintenance, tire and wheel protection, concierge service, and
excess wear and use protection. CbV prices are fixed at specific monthly amounts (e.g.
$650 per month for the XC40 Momentum Subscription), regardless of the cost to provide
insurance to an individual customer. CbV adjusts the price of the vehicle to compensate
for the variable cost of insurance. As a result, a customer with a clean driving record
and low risk profile will effectively pay more for a vehicle than a customer that is more
costly to insure. For such a customer, Volvo manipulates the cost of the vehicle to ensure
that customer' s monthly payment equals the amount promised by the CbV program.
California law expressly prohibits dealers from "packing" the cost of insurance into the
monthly lease payment. (CVC Section I l 713. l 9(a)(2).) As such, CbV exposes Volvo
dealers to liability under this (and other) consumer protection statutes.
In light of the understandable concerns ofour Volvo dealer members, we ask that you
immediately suspend the Cb V program in California and work with your dealer partners to design
a subscription program that strengthens your relationship with dealers and complies with
California law. Please provide a response to this letter no later than Friday, December 21, 2018.
Should you have any questions or comments on this letter, do not hesitate to contact me at
916-441-2599 any time.
Adam Clarke, Head of Network Development, Americas

Peter Wexler, Director of Mobility Solutions, Volvo Car USA
EXHIBIT E
DECLARATION of Vaughn Sigmon
I. BACKGROUND AND EXPERIENCE
1. My name is Vaughn Sigmon. I am the owner of a consulting, coaching and training

company Vaughn Sigmon Business Coaching and I own the local franchise of The
Alternative Board Huntington Beach. A complete copy of my services is available at
Vsigmon.com
2. I have held a variety of positions over the past 30 years in the field of Retail with over 15
in the retail auto industry. During my 11 years of auto experience at CarMax I managed and
supervised both used car dealerships and new car dealerships. Examples of these activities
include:
• Regional Vice President General Manager CarMax Los Angeles CA

• General Manager CarMax Super Store & Chrysler, Dodge in Orlando Fl.
• Assistant Store Manager CarMax Super Store & Toyota Laurel MD
• Regional Vice President General Manager overseeing Chrysler Jeep Dodge LAX in Los
Angeles CA
• Owned C1st Auto Sales a on line used car dealership Huntington Beach CA.
• President of AutoRive Motor Club which is a Luxury Used Car Subscription start up
that is pre-revenue and in investment raise status.
II. ASSIGNMENT AND SUMMARY OF OPINIONS
3. I have been asked by the Glaser Weil law firm, on behalf of California New Car Dealers
Association (CNCDA), to provide an evaluation of the Care by Volvo subscription service.
The main opinion asked for is first, whether the Care by Volvo program results in direct
competition by Volvo with Volvo’s existing dealer network. Second, does this program
effectively result in a modification to the franchise agreement between Volvo and their
dealers. Also, I’ve been asked to opine whether Care by Volvo is creating, or will create,
negative financial impact on existing Volvo dealers. I am not offering a legal interpretation.
4. As I have come to learn, Care by Volvo is a subscription service developed and launched
by Volvo North America. It is a direct-to-consumer Auto Lease/ Subscription program. Care
by Volvo is offering customers access to two popular Volvo models, the XC40 and the S60,
in various levels of trim and option packages with an all in one monthly price. This all in one,
“no haggle”, monthly payment includes one of the two above models, insurance,
maintenance and service contracts. From my studies, Care by Volvo is a direct- to- consumer
online offering that uses Volvo corporate “concierge” employees to guide the consumer
1
through the lease/subscription buying process with very little involvement with the local
dealer.
5. In the course of my research I’ve studied a wide range of resources including but not
limited to, industry news articles that included interviews with Volvo executives, Volvo
franchise agreements both past and current, the Care by Volvo website, the Care By Volvo
customer lease agreements, and the Volvo dealer instructions and protocols for transacting
the Care by Volvo program with the customer.
6. My expertise is in the field of Retail Auto, and I was asked to address this question
generally based on my experience and knowledge. I have analyzed the Care by Volvo
business model for competitive purposes. I’m basing my opinions on my business
experience, industry knowledge and research on the business model. I do believe that my
expertise is applicable to this challenge by the CNCDA. My work with CarMax has given me
firsthand knowledge and experience in the New Car Industry and with the compliance of
New Car Franchise agreements and regulations.
7. My work with AutoRive Motor Club has required a deep understanding of the emerging
auto subscription services offered by multiple OEMs for competitive purposes. In the course
of my research for this business, before being engaged in this matter, I tracked and
researched every subscription model I was able to find. These included but were not limited
to Fair, Passport from Porsche, Canvas from Ford, Mercedes Benz Collection, Flexdrive, Book
by Cadillac, Access by BMW and Care by Volvo. If asked to provide competitive advice and
analysis to any client, or generally in the day to day execution of my daily business
responsibilities, I would use the same knowledge, experience, and expertise that I have
developed over 15 years in the auto industry.
8. Based on my analysis and study, Volvo is now directly competing with its existing dealers’
through the Care by Volvo subscription/lease offering. Due to this direct competition, Volvo
is creating adverse consequences to the existing dealer’s economics, including future sales,
customer good will and profitability.
9. As I have conducted my research, the internal documents associated with the Care by
Volvo transaction which I’ve reviewed are titled, named and referred to as a lease, and it is
effectively a lease transaction. The customer forms are called a lease, the customer is called
a leasee and Volvo is the lessor. The California “lease” agreement for the Care by Volvo
program is administered by Volvo Car Financial Services, which is the finance and leasing
division for Volvo. The Bill of Sale associated with these transactions lists Volvo Cars
Financial Services as the “lessor”. The Care by Volvo agreement with the customer is a
modified lease agreement using the term “lease” found in documents to dealers from Volvo
explaining the program. This all appears to me as though the program is a lease agreement
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being called a subscription for customer marketing purposes by Volvo. Volvo is effectively
leasing cars directly to customers.
10. I have been asked to research and then offer my opinion as to whether this approach to
subscribing/leasing Volvo products through Care by Volvo is a change or modification of
the franchise agreement between Volvo and its Franchise Dealers. The answer is yes, this is
effectively a modification to the franchise agreement. Franchise agreements were put into
place to generally serve as an agreement between manufacturer and dealer to describe the
rules and guidance for the business standards between manufacturer and franchise dealer.
In summary, franchise agreements in the auto industry are in place to generally capture the
terms of the relationship between manufacturer and dealer.
11. Franchise agreements were also put in place to prevent manufacturers from unfairly
opening stores in direct competition with existing franchise dealers that have already
invested time money and effort to open and promote their business. They are designed to
also create the understanding of joint benefits of selling the manufacturer’s product. The
franchise agreement defines each party’s roles and responsibilities as to how the brand will
be represented and the products will be sold.
12. I have studied the current and past Volvo franchise agreements I’ve been able to obtain.
My opinion is not a legal interpretation. The contractual relationship between Volvo and its
dealers has evolved based on my general understanding of franchise agreements. In my
opinion, Care by Volvo is a fundamental change in relationship between manufacturer and
dealer. This is a fundamental change primarily because Care by Volvo now competes directly
with the existing Volvo dealer network. Volvo is transacting and leasing a Volvo product
directly to the consumer and reducing the Volvo dealer to little more than a delivery agent
in the Care by Volvo transaction.
13. The current Volvo franchise agreement requires substantial capital investment on behalf
of the franchise dealer. I’ve read examples of current and past agreements including the
1995 agreement, the 2014 and 2017 agreements. The agreements have been altered
through the years, however there are many common elements that required large amounts
of capital investment. For example:
• Dealer must maintain a Volvo facility and that facility must be kept to current
standards set by the Volvo dealer agreement. According to NADA, the average cost
of opening a new car dealership is $11.3 Million.
• Dealers are required to provide employees, training and management to those
employees. According to NADA, the average new car franchise dealership employs
69 people.
• Volvo franchise dealers must provide repair facilities and conduct warranty repairs
along with maintaining an adequate inventory of parts and accessories.
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• Dealers must provide marketing to create sales and service traffic to their dealership.
According to NADA the average new car dealership spends $494,000 per year on
marketing to potential customers and promoting the brand the dealer represents.
• CSI or Customer Satisfaction scores must be maintained by franchised dealers.
• Volvo franchise dealers must have in stock an adequate representation of Volvo
vehicles along with a well-maintained inventory of demonstrator vehicles. The
average new car dealer across all brands has an average of 300 cars in stock at an
average retail price of $35,285 or $10,855,500.00.
• Volvo also requires adequate working capital for the dealer network to maintain for
continuous business sustainability. This averages about 4% of annual sales.
• The dealer must have an agreed to line of credit always available for the dealership.
14. By Volvo competing directly with its dealer network, it puts the substantial required
economic investment on the part of the dealer in jeopardy. The retail auto business is a
complex, highly competitive, low margin business and generally requires an adequate
volume of units to be sold by the dealer to maintain the franchise viability. Care by Volvo
diverts customers and potential sales away from the dealer and undercuts the dealer’s
ability to maximize potential profit and a future relationship with that customer.
15. Volvo’s CEO Gustafsson shared in an interview with Auto News dated June 2018 that the
company hopes it will lure young buyers fed up with the complicated cost of vehicle
ownership and limitations of traditional leasing. This is evidence to me that Volvo is very
interested in changing how Volvo cars are being sold and leased. During the LA Auto Show
in November 2018, Volvo’s marketing message was “Don’t Buy Our Cars”, which is a clever
play on words to promote their subscription offering. However, the Volvo slogan does have
negative implications regarding how dealers traditionally sell cars. It is apparent based on
studying the instructions for the Care by Volvo program that the manufacturer has limited
the dealer’s participation to how Volvo vehicles will be sold or leased.
16. Volvo seems to be aware that diverting customers away from dealers through Care by
Volvo will have a negative impact on Volvo dealer profits. In an Automotive News article
dated June 4th, 2018, Volvo’s Gustafsson was quoted as saying: “We are between 35 and
40% growth every month. My job is to help our retailers make more money. We don’t have
a problem anymore, we have a profitability opportunity in the US.” “We have tremendous
growth, but as the interest goes up in the US the cost to maintain a stock for cars also goes
up. We need to do something about this.”
17. Mr. Gustafsson goes on in the same article to say that “When we talk about how we
launch a new car, we’ll do it in a Volvo way. We use Care by Volvo.” This indicates that Volvo
is committed to expanding the Care by Volvo program over the medium and long term.
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18. Volvo Franchise dealers maintain high overhead costs with millions of dollars invested in
their facilities, employees, and marketing to promote the brand and compliance
requirements. The Volvo franchise relationship with California dealers has required the
investment of substantial dollars on the part of each dealer. This is done to create and
maintain an attractive show room where customers can view, inspect and test drive Volvo
vehicles. Dealers must also maintain a service facility staffed by factory trained mechanics
paid for by the dealer. Also, dealers are required to engage in regional marketing and
advertising activities in order to build the Volvo brand.
19. Based on my analysis, Volvo’s franchise agreement requires their dealers to maintain a
high standard of customer service. This service is measured by an industry standard called
“CSI” or Customer Service Index. These scores are determined by customer service surveys
that are sent to customers during multiple interactions with the dealer from which they are
conducting business. Both sales of vehicles and service of vehicles are measured in these CSI
scores. Inventory allocations and a portion of the dealership’s profitability are often
determined by CSI scores. By reducing the role of the dealer to little more than a delivery
agent, Care by Volvo bypasses much of the customer interaction with the local dealer. The
Care by Volvo program lowers the number of traditional sale or lease customers, thus
lowering the number of potential customers that would provide the dealer possible positive
CSI scores.
20. For dealers to gain improvements in CSI scores they must have a positive, involved
interaction with the consumer. This allows dealers to begin building positive long-term
relationships with consumers based on positive interaction and experiences with the local
dealer. Care by Volvo may build brand loyalty for Volvo with consumers. However, it
undercuts the opportunity for local franchise dealers to build positive long-term
relationships with Care by Volvo customers as it minimizes the dealer’s involvement with the
customer during the sales negotiation and transaction. This in turn denies Volvo dealers
from potentially obtaining scores that could affect up to 3% of their potential profit per
vehicle according to the margin structure communication dated April 2018 for the XC40
vehicle sent to dealers from Volvo.
21. Based on my analysis of the Care by Volvo program, the all in one price that is offered
only through Volvo and not the local dealer cuts the dealers’ profit potential by not allowing
the dealer to benefit from Finance and Insurance profit (F&I). F&I profit can achieve up to
30% or more of a franchise dealers’ profit. Care by Volvo deprives franchise dealers of F&I
profit due to the all in one pricing structure of the Care by Volvo consumer offer. Dealers
cannot make a profit from loans, leases, extended warranties, accessories or maintenance
agreements.
22. Another example of the negative financial impact to the Volvo Franchise dealers is the
facility improvement program launched last year by Volvo. A Facility Participation
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agreement was issued to all Volvo dealers May 26, 2017. It is required to be adopted by all
Volvo dealers. This agreement lists a long list of facility improvements including exterior,
showroom, workshop, waiting area, reception and parts counter to meet Volvo Retail
Experience requirements. Dealers must commit to make a substantial capital investment and
comply with these requirements including architectural design and construction costs.
Additionally, based on my retail experience, anytime a store or facility is remodeled with
construction taking place during and after business hours, it creates a temporary disruption
to business. In my opinion Care by Volvo decreases dealer profitability through the
diversion of customers away from traditional dealer sales or lease transactions. Yet despite
Volvo directing profitable sales away through the Care by Volvo program, the dealer must
still participate in the facility improvement requirement along with the additional costs.
23. Volvo dealers must comply with the costs and standards associated with this facility
improvement requirement. Volvo does commit to a shared investment in the costs of these
facility improvements. However, not all associated costs incurred in remodeling existing
dealer stores are shared by Volvo. Examples of costs incurred solely by franchise dealers
required to meet the facility improvement program from Volvo are as follows:
• Construction Loan interest

• Cleaning and Maintenance during construction
• Replacement furniture
• Real Estate Purchase expenses
24. My study also leads me to believe that Volvo is not complying with California Civil Code
(S)2985.8 regarding “payment packing” in auto lease agreements. In simple terms, this rule
was put into place in order to require full transparency and disclosure of all component
costs contained in the monthly lease payment. Items such as insurance, maintenance
agreements and warranty agreements must be broken out and fully disclosed as separate
line items on the sale or lease agreement/contract between dealer and consumer. The
consumer must be shown the monthly payment with and without these items included in
their monthly payment.
25. The Care by Volvo lease agreement does not disclose the individual costs prior to the
customer committing to and visiting the chosen dealer location to sign final lease
paperwork. Without the individual costs disclosed prior to arriving at the dealership, the
customer cannot comparison shop or negotiate the prices of the components making up
the monthly lease payment.
26. This rule also prevents dealers from folding additional costs into the monthly payment
without first revealing those costs to a consumer. The fact that total transparency, as
6
required in the rules, is absent from the modified lease agreement limits Volvo dealers and
any other competing dealers to compare their negotiated monthly prices to the Care by
Volvo all in one monthly price. This regulation is included in the California Consumer Bill of
Rights Assembly civil code 2982 which addresses full disclosure of all costs being fully
disclosed in monthly payments for consumer inspection. This rule is contained in the
California Consumer Bill of Rights.
27. By the customer dealing directly with Volvo’s corporate concierge throughout most of
the transaction, the Volvo corporation is building the critical relationship with the consumer
during the sales process and not the local dealer. This denies the dealer from building the
critical long-term good will and relationship with the customer that is often associated with
the sales process. This relationship determines if the customer will become loyal to the
delivering dealer or offer potential sale referrals. In doing online research for customer
reviews and looking at up to 100 reviews on Yelp, Reddit, and Edmunds, only one
mentioned a dealer. This is a strong indication to me that this program effectively leaves the
dealer out of the customer mind and disassociates the dealer from the Care by Volvo
program.
28. There is high value placed on customer loyalty by the auto dealer community. In my
experience, this loyalty is far more than a feel-good scenario. It is a strong influencer of
future business and it can be a major economic component of dealer sales and profitability.
Most successful car dealers understand that the best advertising they can have is the last
happy and completely satisfied customer they sold or leased a car to. They will not only
come back to conduct business with that dealer themselves, they will often send family
members and friends to this dealership. Often to the same sales person they conducted
business with. Customers who have this strong relationship will often drive past a
competitor’s dealership that may be closer or more convenient to do business with their
favorite sales person. From this relationship, multiple sales can be built from just one
satisfied customer. It is the sales person and sales experience that created that loyalty.
29. One Harvard study on the quantitative value of customer satisfaction determined that
customers who had the best experience spent 140% more than those who did not.
According to the 2016 J.D. Power report, customers on average will positively recommend
the dealership from whom they purchased their vehicle six times, with younger buyers being
slightly more likely to recommend (6.2 times) than those older than 55 (5.2 times).
30. In a Bloomberg article dated 12/11/18, the headline reads Volvo’s New Pitch: “Don’t Buy
This Car”. The automaker says selling vehicles via “subscriptions” will help it build stronger
ties to its customers. The article goes on to read that Care by Volvo fits with Volvo’s strategy
of steering drivers toward “subscriptions” akin to streaming services such as Netflix or
Spotify. Customers pay a single monthly bill that covers various fees and repairs—a plan
that Volvo expects to account for half its output by 2025.
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31. Care by Volvo builds a relationship between Volvo, the corporate concierge and
customers. This prevents dealers from building relationships with the customer.
32. The Care by Volvo program does not allow for trade ins of the customers’ existing or
old car to the dealer as part of the monthly lease transaction. Volvo does allow for the
dealer to make a cash offer for the customer’s old car. However, in my experience the
likelihood of a customer selling directly to the Volvo dealer is very low, especially without
the dealer being fully involved in the negotiation and lease transaction in the first place.
Local Volvo dealers are not generally recognized as outlets for a consumer to sell their old
car directly to. Other national retailers such as CarMax who specialize in used cars and
buying cars directly from consumers are more highly recognized for this type of transaction
in the general public’s mind. Consumer perception of local dealers is that dealers are more
focused on the traditional business practice of “trading in” an old car rather than the dealer
buying the old car directly from the consumer.
33. Most new car transactions involve the disposal of an old car as part of the consumer
moving to a new car. This trade in process has been ingrained in our normal lexicon of an
auto transaction. Trade ins can allow for a lower monthly payment using the value of the
trade in. If the consumer chooses to use the equity in their old vehicle as a down payment
toward their new vehicle, they can reduce the cost associated with acquiring a new vehicle.
Dealers are uniquely qualified to adjust the price of a transaction based on the value of the
trade in. My experience is that consumers are highly motivated to include their old car as a
trade in as part of the negotiation to save them time and hassle. The Care by Volvo program
denies the consumer the convenience of trading in their old car.
34. Here is an overview of the normal course of events involving the lease or purchase of a
new car.
• Customer conducts research on which new vehicle to purchase.

• Once they narrow their choice of the vehicles down, they then must decide how to
dispose of their current car that is no longer needed.
• They have several options for disposal.
• Sell the vehicle privately.
• Sell the vehicle to a company that specializes in buying cars directly from the public.
• Trade in the vehicle as part of the purchase of a new car transaction.
• Most customers utilize the trade in method as part of the transaction for a new car
due to the many benefits that process offers.
• Customer typically then visits dealer with the brand and model they want to buy
• They test drive and confirm their decision.
8
• Then they begin to negotiate the price and financing of the new vehicle along with
trade in value of current vehicle. They can and will often cross shop the negotiated
price and terms with other dealers.
• Most financed cars are traded in prior to the completion of the loan terms so there is
a balance of the loan remaining.
• The Dealer will take the old car off the customer’s hands and pay off the existing loan
and handle all title work for the customer.
• Any negative equity on their old car can be rolled into the new car loan. In these
cases, it allows the customer to not have to go into their own cash reserves to pay off
the negative balance of the existing car loan. Positive equity in their old vehicle is
often used as a down payment or cost reduction for their new car.
• The trade in process provides no extra step or hassle in having to sell an old car
themselves.
• One other advantage for the customer is speed of transaction. Trading their old car
into the dealer requires no trips to DMV to sign over title, no advertising costs, no
phone calls from strangers or having to meet with strangers to show them the car
they are attempting to sell.
• The average private sale transaction takes around 90 days, which incurs additional
costs to the customer including additional car payments, insurance costs and
maintenance.
35. Since Care by Volvo does not allow for trade in vehicles from consumers, this deprives
the franchise dealer of important revenue and profit streams. Used car sales are vital to the
revenue and profits of a franchise dealer. According to NADA, 61 percent of a dealer's used
car inventory comes from trade-ins. The margin on the sale of a used car including F&I
profit is on average around $3000. Care by Volvo restricts the opportunity of franchise Volvo
dealers to gain access to a large part of their inventory acquisition channel thus restricting
the opportunity for dealers of high margin sales of the vehicles in the future.
36. Care by Volvo creates additional costs for the delivering dealer. According to the
Delivery Checklist protocol provided by Volvo to their dealers dated May 1, 2018, using the
Volvo delivery management tool software creates additional costs as follows:
• The Care by Volvo car selected by the customer will be shipped to the delivering
dealer and then the dealer must place the selected car into the dealer’s stock or
inventory. The customer selected car then must become part of the floor planned
inventory for however many days until the delivery with the customer is completed.
• Prior to delivery the dealer must verify the credit decision for the Care by Volvo
customer in Dealertrack, typically requiring sales management resources.
• Any Conditional approvals for the Care by Volvo customer must be noted for
stipulations associated with that customer for both credit approval and insurance,
9
requiring dealership management resources. These include proof of residence or
proof of employment.
• Dealer must ensure that the “lease” contract is filled out completely for each Care by
Volvo delivery. (Note it is termed a “lease” contract not a “subscription” contract.)
• Volvo Cars Financial Services includes a funding checklist that the dealer must
complete requiring more management time and payroll expense.
• The dealer must detail and prep the car for delivery which requires payroll expense
and supplies.
• The car must be filled with gas at dealers’ cost.
• Paperwork must be completed to wholesale the vehicle to Volvo Cars Financial
Services which requires dealer personnel to complete.
• The Care by Volvo vehicle must be registered in the state DMV which requires payroll
expenses from their business office personnel.
• Dealer must deliver the car using the Care by Volvo checklist which requires
manpower resources and payroll expenses.
37. When a consumer agrees to the Care by Volvo program, he or she can select the model,
color and equipment they desire. The vehicles the consumer selects are in an inventory of
vehicles maintained by Volvo and are termed “port stock” and not in local dealer inventory.
Once the consumer selects his or her desired vehicle, they are assigned, based on zip code,
the participating Volvo dealer for delivery. The consumer does have the ability to select
another dealer if they choose. The selected vehicle is then shipped from Volvo port stock
and must be accepted and placed into the delivering dealers stock.
38. Care by Volvo is described as a voluntary program that any California Volvo dealer can
participate in. However, based on my knowledge and experience, it is my opinion that
Volvo’s request to California dealers that they participate in the Care by Volvo program is
coercive. Volvo dealers are dependent on Volvo for their inventory allocation of Volvo
vehicles, which in turn drive their sales and profits. I believe that at least some of the
California dealers who have agreed to participate in the Care by Volvo program have done
so in order to ensure they do not erode or jeopardize the relationship they have with Volvo
corporate or their inventory allocation. They fear being cut out of future allocation of
inventory by not “playing along” with the Care by Volvo program.
39. Based on my research in auto and business-related publications, Care by Volvo is an

apparent success for Volvo at the expense of the dealers. Also, as Volvo executives have
stated publicly, they intend to use Care by Volvo to build relationships directly with the
consuming public. This usurps the classic dealer function in the transaction. By being a
direct competitor with its dealers and successfully selling Volvo products directly to
consumers through the Care by Volvo program, it is my opinion that this limits the number
of vehicles available for allocation to the dealer’s inventory. By limiting available inventory
for sale, dealers are potentially adversely denied sales of fast selling inventory due to lack of
10
supply or availability of inventory. Also, based on my experience, the dealer’s allocation of
inventory is determined by previous unit sales performance.
40. Based on my knowledge of the auto industry, dealers can order only certain quantities of
vehicles based on previous sales volume of vehicles. New car dealers are given allocations of
vehicles on a month by month basis. A dealer may quickly sell through his allocation of a
vehicle moving them all in a week, and then must wait several weeks before he can ask for
more. That’s just to ask. Actually, getting the needed cars will take weeks beyond that. If
production of vehicles by the manufacturer cannot keep up with sales, the dealer suffers. By
adding Care by Volvo as a new competitor against the dealer and selling what appears to be
a successful product, this program from Volvo can cut the number of cars allocated to
dealers. This lack of available inventory denies dealers the ability to maximize their own
dealerships unit sales volume, denying them the future capability of ordering inventory
quantities that will maximize their sales and profitability.
41. In an Auto News November 2018 interview with Volvo’s Gustafsson, he shares that the
Care by Volvo program has led to unforeseen challenges-- namely a backlog of orders and
tension with dealers. He goes on to say that consumers are signing up now for the XC 40
and are on a wait list that stretches into 2019. Further, he reveals that interest in the
crossover has pinched supply that dealers had otherwise expected would be available for
the traditional vehicle sales. He goes on to share that Care by Volvo has claimed as much as
15 percent of the available XC40 crossovers sales.
42. At the November 2018 LA Auto Show, the marketing for Volvo was “Don’t Buy Our Cars”
which on its surface is a clever play on words. However, based on the facts and in my auto
industry experience it indicates that Volvo wants to build their ability to deal directly with
consumers through the Care by Volvo program and further reduce the involvement of its
franchise dealers and their ability to sell cars.
43. In my opinion Care by Volvo will have a negative impact on the medium and long-term
viability of franchise dealers. Care by Volvo leases/ subscribes the vehicle directly to the
consumer with minimum involvement with the local franchise dealer. Once again, the dealer
is deprived of the full opportunity to build a positive relationship with the consumer. A
relationship that will motivate the consumer to continue returning to the delivering dealer
for future service, parts and purchases for vehicles.
44. Since Care by Volvo is a short-term lease that allows the customer to renew annually,
this keeps a portion of Volvo customers in new cars that are under warranty the entire time
it is being driven. The dealer who has been denied the opportunity to build the important
long-term relationship with the customer will be impacted with less out of warranty cars for
repairs.
11
45. The service department in most dealerships is the most profitable channels of revenue
and cash flow providing up to 60% of a dealer’s profit. Care by Volvo is a short-term lease
that allows customers to renew each year. This will take many customers out of the
traditional cycle of driving a car. Research by R.L. Polk says that the average age of a
modern vehicle is 11.4 years, while the average length of time drivers keeps a new vehicle is
71.4 months or around 6 years. So, this program can effectively limit the number of
customers paying for repairs. This reduction in service revenue will have dramatic financial
impact on current Volvo dealers in the future.
46. In my opinion, all the concerns I’ve listed added together and based on my experience,
Care by Volvo creates a fundamental change and modification to the franchise agreement
between Volvo and its dealers. Care by Volvo is a dramatic change in the car buying
process for Volvo vehicles. These substantial changes have multiple current and potential
medium and long-term effects on the Volvo dealer’s business relationship with the
customer and with Volvo. These changes also have a strong potential of having a negative
effect on the economics for all Volvo dealers.
47. In my opinion by directly competing with their dealers, Care by Volvo threatens for the
reasons stated above, the sales, profits and future viability of Volvo dealers and sets a
dangerous precedent for other manufacturers to follow in the future. The Care by Volvo
program could eliminate the number of dealers in California eliminating high paying jobs
and tax revenue. Volvo is becoming a direct competitor with its dealers using a sales
approach targeting a new group of consumers that had not been a part of the Volvo
demographics in the past. These are new consumers that Care by Volvo is potentially taking
away from the dealer.
48. In an Auto News interview in April 2018, Volvo’s CEO Gustafsson shared that that after 3
months Volvo delivered its full year target for Care by Volvo.
49. In an interview with Road Show, Gustafsson was quoted regarding updates to their
customer platform: “Beyond improving the overall user experience, Gustafsson says these
updates will eventually allow Care by Volvo to expand to the automaker's full range of
products.” "When we launch [the update] we have the capabilities to put the total portfolio
into the Care by Volvo solution," Gustafsson said. "That's what we aim for." He goes on to
say “In the future, the company would even like to expand Care by Volvo to handle used
cars. But right now, the focus is to get the new-car subscription service right and roll it out
across the United States.” This indicates to me a strong commitment on the part of Volvo to
the Care by Volvo program, further threatening the economic health of Volvo franchise
dealers.
50. Based on the evidence that I have reviewed, Volvo is more interested in building their
sales through direct transactions with consumers and not through their franchise dealers.
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51. In a Bloomberg article dated December10 2018, Chief Executive Officer Hakan
Samuelsson shared, Volvo expects Care by Volvo to account for half its output by 2025.
Volvo appears to be strategically planning a rapid expansion of the Care by Volvo program.
52. Care by Volvo could and probably will have medium- and long-term negative effects on
consumers in the future if allowed to continue in its current form. The impact on consumers
could come from increase in pricing, or a lack of convenient dealer locations for having their
car serviced or to acquire parts for their vehicle. A reasonable consequence of Care by Volvo
would be the reduction in the number of Volvo dealerships. The impact on consumers could
be a later increase in repair costs on their older Volvo vehicles.
Signed
Vaughn Sigmon
_____________________________________________Date________________
1/15/2019
Vaughn Sigmon
13
EXHIBIT F
Report of Dr. Andrew Safir
for California New Car Dealers Association
before the California New Motor Vehicle Board
I. QUALIFICATIONS
I am the President of Recon Research Corporation, an economic advisory firm specializing

in asset valuation, modeling financial performance, competitive business behavior and
damage calculation. I have held this position since 1980.
I received a Bachelor of Arts degree in economics and psychology from the University of
Colorado in 1969, a Master of Arts in economics from Tufts University in 1970, and a Ph.D.
in economics from Tufts University in 1975. My fields of specialty include public finance,
trade, micro economics and econometrics.
Prior to the founding of Recon Research, I held a variety of positions with the federal
government of the United States, and the State of California. In 1972, I was appointed as a
staff member to the Council of Economic Advisers to the President of the United States, and
in mid-1973 joined the White House Council on International Economic Policy. In 1974, I
moved to the United States Department of Justice, where I served as the senior economic
advisor to the Office of Justice Policy, Planning, and Research. In 1975, I was appointed as
the Assistant Director of the Office of International Energy Policy at the U.S. Treasury. I left
this position in 1977 to become the Chief Business Economist for the State of California
from 1978-80. I also remained an advisor to the United States General Accounting Office
specializing in energy, international finance, and national security issues throughout much
of the 1980s.
As California's Chief Business Economist during the period mentioned above, and as
Recon Research Corporation
President of Recon Research, I have had extensive experience in constructing, utilizing and
analyzing corporate performance models and damage calculations, and in reviewing the work
of other analysts regarding these issues. I have also filed testimony as an expert regarding
competitive behavior, and the economic impact anti-competitive actions can have on market
structure.
Over the course of my career, I have appeared as an expert economic witness numerous times
in U.S. and Canadian courts, and have filed declarations in support of requests for regulatory
1
actions in many instances. A list of my participation in court proceedings, arbitrations and
regulatory hearings over the past ten years is provided as Tab A.
II. BACKGROUND
In November 2017, Volvo Car USA (“VCUSA” or “Volvo”) introduced Care by Volvo
(“CbV”), touted as a “negotiation-free way to own, enjoy and upgrade to a new Volvo.” The
company indicated that this offering was an “incremental” one with respect to dealers that
would be “in addition to traditional vehicle purchasing and leasing …” Moreover, according
to Volvo, this program offers customers “… a short-term commitment to a new car with all
costs included in one flat rate.” This included maintenance, car insurance, depreciation (wear
and tear), and ancillary services such as concierge treatment and roadside protection. Billed
as a “subscription plan” with a two year vehicle commitment, the program allows for the
customer to replace the vehicle every 12 months, at the then current two year subscription
rate. The initial cost for the “service” ranged from $650 to $800 per month depending upon
the “package” of Volvo features a customer ordered directly from the manufacturer. CbV
deliveries take place at Volvo dealerships chosen by the manufacturer, with the dealer being
compensated at a fixed 8% of the vehicle wholesale price, in order to cover the cost of
functioning as the intermediary in the manufacturer-to-consumer transaction.1
The California New Car Dealers Association (“CNCDA”) has informed Volvo that it has
concerns with several aspects of the CbV program. Primary among these is the belief that
the CbV program constitutes unlawful competition in the State of California.2 This follows
from the California Vehicle Code which indicates that manufacturers may not compete
directly against their own dealers.3 As a result, a manufacturer leasing program (even if
termed a “subscription” by Volvo), that essentially seeks to leapfrog California Volvo dealers
and market directly to the end-use customer, may constitute unlawful competition in
violation of this statute.
1
Care by Volvo Announcement to Retailers, Nov 11, 2017.
2
Letter from Brian Maas to Anders Gustafsson, May 1, 2018.
3
West's Ann. Cal. Vehicle Code § 11713.3, CA VEHICLE § 11713.3.
2
III. ASSIGNMENT
I have been asked by Counsel for CNCDA to a) review the economic reasons why
manufacturers have traditionally been prohibited from competing with their dealers in the
end-use market, b) determine from an economic standpoint whether the CbV program
constitutes competition with California dealers, c) illustrate how dealer margins can be
detrimentally impacted over time as a result of the introduction of the CbV program, and
d) evaluate whether CbV results in a fundamental change in the economic relationship
between Volvo and its dealers.
In evaluating the above issues, I have relied upon documents provided by counsel, documents
in the public domain and documents in the business and automotive press, as well as my own
research. I have also relied on my professional understanding of economics, and the
generally accepted application of economic theories regarding commercial competition.
IV. SUMMARY OF OPINIONS
1. Historically, California (and other states) have sought to minimize or

prohibit competition between automotive manufacturers and the
dealerships which sell or arrange to lease these capital assets to the public.
The rationale for this prohibition is rooted in historical precedent,
commercial equity and economic theory. In fact, strict limitations on
manufacturer-dealer competition are reflected in the California Vehicle
Code.
2. The CbV program is clearly an alternative, provided by Volvo, to the

purchase or lease of a vehicle from a Volvo dealership. Although it
involves some aspect of dealer participation, it is primarily a
manufacturer initiative designed to bypass any meaningful economic Recon Research Corporation
dealer involvement. As a result, it places the manufacturer – VCUSA– in
direct competition with California Volvo dealerships.
3. The compensation provided by VCUSA to dealers agreeing to facilitate

CbV transactions is less than the potential losses which these dealers may
experience as a result of the existence of the program.
3
4. CbV represents a fundamental change in the existing relationship between
VCUSA and its dealers. Continuation or expansion of the CbV program
in the California market will be economically detrimental to Volvo
dealerships within the State.
V. OPINION DETAIL
1. California’s Vehicle Code imposes strict limits on competition between automotive

manufacturers and the dealerships which sell or arrange to lease these capital assets
to the public. The rationale for this prohibition is rooted in historical precedent,
commercial equity and economic theory.
The auto dealer franchise system was originally developed by manufacturers. It was based
on the belief that a franchise dealer would have greater knowledge than the manufacturer
about local market conditions and auto demand. It was also predicated on the understanding
that independently owned dealers would have strong incentives to invest their own resources
in developing their dealership franchise, and in marketing their dealer brand to their own
local customer base. Moreover, the independent dealer franchise model allowed auto
manufacturers to expand sales territories with only a limited commitment of scarce
manufacturer capital.4
Throughout the twentieth century, dealers and manufacturers in California and elsewhere
have relied on this distribution paradigm as the most cost-effective way to expand their
presence into local markets. As a result, independently owned auto dealers have invested
more than $200 billion in land, buildings, software and infrastructure in order to support their
segment of the automobile supply chain.
Dealers have learned over time, however, that despite their large investments in the
infrastructure to sell cars, they are essentially at the mercy of the manufacturers, who could
replace them, or start up nearby competitors, if they were displeased with dealer
performance. This problem was particularly acute early in the 20th Century. During that
period, the large U.S. automakers such as Ford and GM had an economic incentive to keep
plants operating at full capacity. This put tremendous pressure on dealers, who were forced
to continue to take car allocations that could not be sold during the downturn. Ultimately
4
Peter J. Ferrara, Auto Dealers Unambiguously Increase Competition,
https://www.ftc.gov/system/files/documents/public_comments/2016/03/24256-127809.pdf
4
auto production fell during downturns, but not before dealers experienced disproportionate
reductions in operating margins. In effect, the dealers became an economic cushion for
manufactures, forced to absorb any initial losses during economic hard times.5
One logical response to the obvious disparity between the limited economic power of a
number of independent automotive dealerships and the economic standing of large, national
or international auto manufacturers would be for the dealers to bargain as a group. In this
manner, for example, all Ford dealers in a specific geographic area could discuss distribution
policy jointly with Ford Motors, and in that manner avoid allowing Ford to achieve coercive
economic goals by focusing on the economic weakness which may exist in individual Ford
dealerships. Dealers have not been able to take this approach, however, due largely to
federal and state anti-trust laws that prohibit just such corporate combinations as a potential
restraint of trade.6
Independent auto dealers have achieved some limited protections against the economic
dominance of auto manufacturers. In particular, dealers have used their state and local
standing as taxpayers and employers to obtain legislation providing for state regulations
which govern the relationship between independent dealers and the manufacturers whose cars
and trucks they sell. Over time, these “dealer franchise laws” have improved the ability of
dealers to prevent manufacturers from undercutting dealer margins, and to require retail auto
sales generally to be conducted through independent, franchised dealers with licenses. Most
importantly, state franchise laws have prohibited auto manufacturers from direct competition
with the dealers in their supply chain, thus preserving the dealer distribution model.
In particular, California Motor Vehicle franchise law provides that manufacturers may not
unlawfully compete against their own dealers. As Vehicle Code section 11713.3 states:

5
“Changing Channels In The Automotive Industry: The Future of Automotive Marketing and Distribution,”
Strategy & Business, First Quarter 1999, Issue #14. https://www.strategy-
business.com/article/10102?gko=f738b. See also, Packman, M. (1954). Competition in automobiles. Editorial
research reports 1954 (Vol. II). Washington, DC: Compass Quarterly Press. Retrieved from
http://library.cqpress.com/cqresearcher/cqresrre1954070100.
6
This is by no means only a theoretical concern. In 1990, the Justice Department filed suit against the
National Automobile Dealers Association for actions the association was advocating to prevent manufacturers
from offering selective consumer rebates which were detrimental to dealer margins. The suit was settled in
1995 with a cease and desist order which prevented the NADA from taking similar actions in the future. See
New York Times, 9-21-1995, national edition, page 7. “Car Dealers’ Association Settles U.S. Antitrust
Lawsuit on Prices.”
5
“It is unlawful and a violation of this code for a manufacturer, manufacturer
branch, distributor, or distributor branch licensed pursuant to this code to do,
directly or indirectly through an affiliate, any of the following.... (o)(1) To
compete with a dealer in the same line-make operating under an agreement or
franchise from a manufacturer or distributor in the relevant market area.”7
From an economic standpoint, California’s motor vehicle franchise laws remain vital to the
continuance of the independent dealer model. Simply put, franchise laws protect the long
term dealer investments in plant, equipment and employees without which this link in the
auto delivery supply chain would be at significant economic risk.
In addition to selling and leasing new cars, profitable dealerships service cars, sell used ones,
provide roadside assistance and market ancillary add-on’s such as undercoating, and tire
replacement. Losing the exclusivity of offering new car options could seriously reduce
dealer viability. If manufacturers were allowed to compete directly against dealers in the
new car space, adequate dealer margins would be more difficult to achieve, and the service
offerings currently provided by dealerships would be eroded.
Allowing programs which conflict with franchise law protections, especially programs that
facilitate direct manufacturer-to-dealer competition – should be discouraged as a matter of
economic equity.
2. The CbV program is clearly an alternative, provided by Volvo, to the purchase or

lease of a vehicle from a Volvo dealership. As a result, it places the manufacturer –
VCUSA – in direct competition with Volvo dealerships.
CbV was introduced by VCUSA in November of 2017 as a way to “own, enjoy and upgrade

to a new Volvo.” It offers customers a short-term commitment to a new car with all costs
included in one flat rate. As VCUSA indicated in an announcement to retailers:
“For the first time, maintenance, car insurance, wear-and-tear, protection plans
and the cost of the vehicle itself will be rolled into one easy, nationally based
monthly rate. Customers will sign up for a two-year subscription, [with] an
7
West's Ann. Cal. Vehicle Code § 11713.3, CA VEHICLE § 11713.3
6
option ... to change cars and sign up for a new 24-month subscriptions as early
as 12 months into their agreement.”8
In more detail, the subscription program put together by VCUSA includes a 24 month new
car lease payment, which, in one flat rate, includes the following items:
o vehicle maintenance, including wipers and brake pads;
o a premium personal automotive insurance policy provided by Liberty Mutual;
o excess wear and usage coverage of $1,000 (dents and dings coverage);
o roadside assistance and concierge services;
o Volvo on-call Subscription; and
o a mileage allowance of 15,000 miles per year.
VCUSA has stated publicly that it does not view the CbV program as being competitive with
new car offerings through dealer outlets in any way. Rather, Volvo states that CbV has been
designed to be “additive.” That is, VCUSA asserts that the program will incrementally
improve existing dealer margins by increasing throughput in dealer facilities, and by
attracting new customer segments to the Volvo brand. The manufacturer will also contribute
directly to dealer margins by providing an incentive fee of 8% of the wholesale value for
each CbV unit that is delivered through a Volvo retail outlet. Consequently, VCUSA asserts
that the CbV program does not violate California franchise statutes which prohibit car
manufacturers from competing with their retail dealerships.9
From an economic standpoint however, CbV is a direct competitor to its dealers. As

currently designed, the CbV program is offering a product that is virtually identical to that
offered by Volvo dealerships – a short term lease of a vehicle. Moreover, the CbV product
is being offered to essentially the same customer base as that targeted by Volvo dealerships
– higher-income potential automotive purchasers interested in Volvo vehicles. This is

particularly true due to the vehicle currently being offered by CbV. The program targets the
XC40 SUV, a model that is relatively scarce in the U.S. and one in high demand by Volvo
customers, whether interested in CbV or not.10 Consequently, CbV transactions result in a
8
See Care by Volvo Announcement Retailers, version 1, 2017-11-11.
9
CNCDA April 26, 2018 Meeting, Care by Volvo PowerPoint handout.
10
Dowling, Neil, “Volvo Dealers Angry: New subscription service by Volvo slammed for taking sales off
US dealers, GoAutoNewsPremium Newsletter, Dec 13, 2018;
(continued...)
7
zero-sum outcome: every successful CbV subscription – by definition – eliminates the
possibility of a dealer transaction with the same customer for a car in high demand. There
is a winner and loser in every instance; and where CbV – and by extension VCUSA – is the
winner, the Volvo dealership in the same geographic region is the loser. Consequently, CbV
is the very essence of direct competition.
Moreover, the CbV program is essentially unfair direct competition. As indicated later in
Table 1 and the accompanying text, Volvo is essentially undercutting the price that Volvo
dealers can offer. Moreover, Volvo dealers are dependent upon VCUSA for their new car
supplies. Where dealers are too successful in competing against CbV, VCUSA clearly has
the ability to retaliate. It can slow down new car deliveries, alter expected vehicle
allocations, change dealer financing terms or selectively eliminate dealer incentives. If such
behavior is not per se illegal, it is economically reasonable to predict it will occur at some
point in time. Competitors seek comparative advantage. However, this is completely
contrary to the franchise protection laws in California.
It is also contrary to franchise protection statutes for VCUSA to offer products in competition
with their dealers which dealers cannot by law offer retail customers. In 2006, the California
legislature enacted a Car Buyer’s Bill of Rights which applies specifically to auto dealers.
One of the many provisions in the legislation was California Vehicle Code Section 11713.19,
which states that optional items in a car lease or sale must be disclosed before the charges
are written into a contract. It is also a requirement under the Car Buyers Bill of Rights for
the dealer to list all the optional items included in the purchase contract, itemize their cost,
and state what the difference would be in a customer’s monthly payments with and without
the optional items.
The intent of these dealer obligations was to prevent “payment packing” in car lease or sales

packages presented to consumers. This is the practice of adding more than the actual cost
of a lease into the lease terms without disclosing the cost of these items so that they can be
taken out of the deal by consumers.11 Thus, dealers in California must “build up” a lease or
10
(...continued)
https://premium.goauto.com.au/volvo-dealers-angry/.
11
“The FTC’s Increased Role in Regulating Auto Advertising, Sales and Lease Practices.” Comments of
the Attorneys General 31 States and the District of Columbia Offered to the FTC, Public Roundtables:
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 76 Fed. Reg., No. 50 (March 15, 2011).
See also: Carlton Wolf, Payment Packing Car Dealer Scam, Dec 29, 2018.
(continued...)
8
sale transaction, beginning with a clear presentation of the cost of the vehicle on a stand
alone basis, prior to discussing “add-ons,” such as insurance coverage, paint and fabric
protection, service contracts and security systems. The reasoning behind anti-deal packing
ordinances is that is easier for the dealer to obtain a higher overall price from a sale or lease
if consumers are not fully informed about the actual cost of individual package contents.
Although California dealers understand the philosophy behind the payment packing
prohibitions and are obligated to abide by them, the CbV program essentially ignores these
restrictions. Although the VCUSA website does delineate the components of the CbV
package, it makes clear that the only price offered is the package price itself. For example,
in its CbV Announcement to Retailers, VCUSA stated the program was:
“…a simple, negotiation-free way to own … a new Volvo … with all costs
included in one flat rate. … [M]aintenance, car insurance, wear and tear,
protection plans and the cost of the vehicle itself will be rolled into one, easy,
nationally based monthly rate.”12
Consequently, there is no clear way to determine the actual costs of the individual
components of the CbV package. Were VCUSA actually a dealer in California, this type of
offering would simply be illegal, as this type of marketing model has lead in the past to
consumer fraud and abuse.13 VCUSA is not a dealer, however, and appears to believe they
can engage in product-packing with impunity. It is unfair to dealers, not because dealers also
wish to circumvent the product packing statutes, but because it offers a deceptively simple
11
(...continued)
https://www.autocheatsheet.com/car-dealer-scams/payment-packing-car-dealer-scam.html

12
Care by Volvo Launches in the United States on November 29, 2017, Care by Volvo Announcement
Memo to Retailers, Nov 22, 2017.
13
One good example of the consumer abuse this type of bundling can create was illustrated by Brian Maas,
the President of the California New Car Dealers Association in a letter to Anders Gustafsson, CEO of Volvo
Cars of North America, regarding the CbV program: “By bundling insurance into the lease payments, the
‘agreed upon value at lease signing’ becomes variable. Under this [CbV] bundled payment system, customers
with low insurance rates based on their age, driving record, domicile, etc. will pay a higher ‘agreed upon
value of vehicle at lease signing’ than those with higher insurance premiums to arrive at the ‘same’ monthly
payment. Put differently, if a CbV customer is a low-risk driver, the value of the customer’s vehicle must
artificially increase for the customer to receive the same monthly payments as higher risk drivers.” [May 1,
2018 letter]. Note: Mathematically, this is the result of the “non-negotiated” package cost to the consumer.
If the actual cost of one included component is too high, another must be reduced in order to keep the total
cost constant.
9
package price to consumers which dealers cannot meet directly. Dealer offers must be more
carefully delineated and complex. Even if a dealer ultimately matches a CbV package offer,
the dealer must interact much more directly with the consumer in order to do so.
3. The compensation provided by VCUSA to dealers agreeing to facilitate Care by Volvo

transactions is less than the potential losses which these dealers may experience as
a result of the existence of the program.
The CbV program does more than compete with dealers. It actually undercuts dealer market
share and weakens the existing Volvo dealer network in California. This is highlighted in
Table 1, which compares the cost elements in the CbV program for its most popular offering,
the Volvo XC40, to a minimum cost, positive margin lease which could be offered by an
average dealer.
TABLE 1
Comparison of CbV Subscription Price to Equivalent Dealer Lease
Volvo XC40, SUV, 2019 Momentum
Column 1 Column 2
CbV Dealer
MSRP $33,700.00 $33,700.00
Base Lease $700.00 $645.00
Auto Insurance Incl. $231.00
Road hazard protection Incl. $42.00
Excess wear & tear Incl. $28.00
Total Price Offering $700.00 $946.00
Conclusion: Dealer is being undercut by $246/month. (See footnotes 14-17.)
Column 1 of Table 1 summarizes the essential elements of the CbV offering for the XC40 Recon Research Corporation
2019 SUV Momentum. As indicated, Volvo customers can acquire this vehicle for a Base
Lease of $700 per month. Since all other major cost categories in a standard lease transaction
are already included in the CbV deal, the “base” lease price is essentially the total price
offering. Under the CbV program, $700 is then the total monthly cost for a 24 month lease
with no down payment, a mileage allowance of 15,000 miles per year, auto insurance, road
hazard protection and excess wear coverage included.
10
Column 2 of the Table is an approximation of what it would take for a Volvo dealer to
realistically match the current CbV offer. This estimate has been derived by modifying the
closest available dealer offering highlighted from an internet search, and from discussions
with insurance brokers as well as Liberty Mutual, the actual underwriter of the CbV
insurance component. As Column 2 indicates, if dealers were to offer a two year lease that
matched the CbV features, it could not be offered at a base price of less than $645.00 per
month.14 To this, a consumer would be faced with additional fees of approximately $230 for
insurance,15 $42 in road hazard protection16 and $28 per month to cover excess wear.17 All
in, the total price of a comparable lease offering from the dealer would be about $946 per
month, assuming auto dealers could actually bundle vehicle insurance as a component of the
lease transaction, which is not likely.
14
Dealer websites reviewed indicate that most dealers will not offer a two year lease. The most prevalent
dealer offering is a payment of $395 per month for a lease term of 36 months with a mileage allowance of
10,000 per year, an excess mileage charge of $0.25/mile and an up-front payment of about $3,500. The
following steps were taken to “morph” this offering into one similar to the CbV base vehicle cost: First,
monthly payments were adjusted upward by the mileage increase of 5,000 miles per year. It was assumed
this adjustment would cost $0.25 per mile, for a total adjustment monthly of $104 ($0.25 per mile x 5,000
miles per year / 12 months = $104). Second, the up-front payment was applied monthly, by assuming that
the $3,495 would just be collected monthly for only a two year term. That is the total payment would be
reduced by one third, and spread over 24 months. That is, $3,495/36 months = $97 per month for the two
year lease. Third, the depreciation cost in the three year lease was adjusted to account for the shorter lease
term. Using the TrueCost-Edmunds website, the reported depreciation cost in a new Volvo similar to the
XC40 (the XC60) was approximately 17.3% in year 1, 9.1% in year 2 and 8.0% in year three. This implies
that over a three year lease of $395 per month, the average depreciation component would be about $322 per
month. On a two year lease, with average depreciation in the first year at 17.3% and 9.1% in the second year,
the average depreciation rate would be $370 per month. Consequently, moving to a 2 year lease from a 3 year
lease increases monthly depreciation by about $49. In total, adjusting the basic three year lease offered at
$395 per month, 10,000 miles per year allowed, $3,495 due at signing to a two year lease, no down payment
and 15,000 miles allowed, increases the lease price by $250, to $645 per month.

15
Insurance coverage included in the CbV offering is provided by Liberty Mutual Insurance Company. The
policy includes bodily injury liability at $250,000 per person, $500,000 per accident; property damage
liability of $100,000; comprehensive coverage with $500 deductible; collision coverage with a $500
deductible uninsured motorist coverage at $250,000 per person and $500,000 per accident and a medical
payment allowance of $5,000. Discussions with Liberty Mutual representatives indicate that this policy
provided outside the CbV program could be provided at $234 per month. Discussions with independent
brokers indicate a policy premium of $228 per month. An average between the two of $231 per month is
assumed here. This amount would have to be tacked on to the dealer base price offering to match the inclusive
coverage in the CbV program.
16
Road Hazard coverage is estimated to be $1,495 over 3 year lease; divide by 36 months = $41.52/mo.
17
Average excess wear and tear payments at lease end have been estimated to be approximately $1000;
divide by 36 months = $27.78/mo, if this is embedded in the monthly lease payment.
11
From an economic standpoint, it is no wonder that Volvo USA has reported it “sold out” its
initial allocation of 1,000 XC40s in the program much more rapidly than initially expected.18
Basically, Volvo USA appears to be undercutting any potential dealer offering by about $250
per month. Clearly, over time, this can only diminish the role of the dealer in the Volvo USA
sales chain.
Volvo USA has also indicated that the U.S. subscription program is still an experimental one,
and that a total U.S. allocation of cars to subscription distribution of no more than 1,000 is
not likely to impact dealer economics. This is clearly not the case in a micro context and
may well be worse in a macro-economic context on dealers over time. In early 2018, the
Volvo Dealers’ Council agreed to a 90-10 split for CbV, whereby Volvo allocated 90% of
XC40's to the traditional retail channel, and 10% to CbV. Apparently, this amounted to
about 1,000 vehicles in total in the CbV program for its first year. However California
dealers apparently received 25% of the total national allocation of CbV vehicles, or about
250. Consequently, while the total national traditional retail/CbV split may have been 90/10,
dealers in California have been burdened with a disproportionate number.19
As indicated earlier, although VCUSA has asserted that its CbV program is strictly
incremental, there is no real evidence of this. In contrast, it is clear that the primary
subscription car, the XC40, is in high demand. Dealers have reported they would have no
problem selling or leasing higher allocations of these cars than they actually received in
2018. On this basis, it is fair to assume that for each subscription completed, one less sale
or lease of an XC40 would have been made by the dealer during the lasts 12 months. It is
true that the manufacturer has provided a dealer offset for each car subscribed equal to 8%
of the MSRP, or about what the dealer would make on the initial sale or lease to a new car
customer. This does not compensate the dealer, however, for other costs incurred, or
revenue foregone that would generally be associated with a new car sale or lease.
For example, every subscription that takes the place of a car that would otherwise come off
the dealer lot, means one car remains on the lot longer than would otherwise be the case.
Carrying costs are the biggest “killer” of dealer margins, as every piece of existing inventory
is typically paid for with borrowed money through “floor plan” financing. It has been
estimated that if a vehicle remains on the dealer floor for more than 120 days, the dealer will
18
“Volvo's Subscription Service Copes with its Success,” Automotive News, Nov 12, 2018.
19
CNCDA April 26, 2018 Meeting, Care by Volvo PowerPoint handout.
12
lose money on its sale, even at MSRP.20 Consequently, timing is of the essence in the
maintenance of dealer margins. Simply replacing what the dealer would make on the initial
sale of a subscription vehicle does nothing to reduce existing dealer infrastructure costs,
which are only amortized though the sale of the dealer’s inventory.
The potential impact of the CbV on actual floor plan expenses is completely ignored by the
program. As the initial announcement to Retailers stated: “Since vehicles will be allocated
from port stock, there will be minimal time that the vehicle resides at the retailer. The goal
of the Volvo Concierge is to coordinate the arrival time of both the car and the customer to
minimize the time the car is idle on the lot. As a result, there will be no floor plan support.”21
Unfortunately the sale of a subscription package substitutes for a sale which would take an
existing vehicle off the dealers lot. As a result it does have an impact on floor plan expenses,
increasing these costs.
Moreover, while subscription sales do little to reduce overhead expenses, they do reduce the
dealer margin normally associated with ancillary service offerings, such as tire replacement
packages, and financing income.22 The program also reduces the dealer’s ability to acquire
high quality used cars as trade ins, a major source of dealer profitability. Having a steady
stream of high quality “trade ins” for example, has been estimated to provide anywhere from
$2,000 to $4,000 in gross benefit to the dealer on the overall sale transaction.23
Consequently, in the short term, on a vehicle by vehicle basis, CbV is clearly not “margin
neutral” from the standpoint of Volvo dealers.
4. Continuation of expansion of the CbV program in the California market over the near
term future will be economically detrimental to Volvo dealerships within the State.
At a minimum, CbV represents a fundamental change in existing arrangements
between VCUSA and its existing dealers.
20
Report of Vaughn Sigmon, January 14, 2019.
21
Care by Volvo Launches in the United States on November 29, 2017, Care by Volvo Announcement
Memo to Retailers, Nov 22, 2017.
22
As the Announcement to Retailers Memo states: “… subscription is all inclusive of service, maintenance
and insurance. As a result, there are no additional services that can be added to the Care by Volvo
subscription.”
23
Report of Vaughn Sigmon, January 14, 2019. See also Where Does the Car Dealer Make Money? Mostly
From Service, Not From Car Sales, Edmunds, December 3rd, 2013.
https://www.edmunds.com/car-buying/where-does-the-car-dealer-make-money.html.
13
In the long run, the CbV program could be disastrous for existing Volvo dealerships. It is
clear from recent presentations at the 2018 LA Auto Show that Volvo is committed to the
subscription sales model, despite earlier protestations that the program is still “experimental.”
The manufacturer placed banners around the Volvo presentation booth that read: “Don’t buy
this car,” with literature touting its subscription approach. Moreover Volvo has indicated
that it expects to account for half its total output worldwide through subscription delivery by
2025.24
In Europe, a subscription delivery plan which bypasses dealers completely is already well
underway. The Chinese parent of Volvo is actively marketing this service through a
subsidiary called Lynk & Co. In the Lynk model, there are no dealers at all. Cars are
ordered on line, or through showrooms, pop-up stores or traveling exhibitions at which car
models can be physically seen. Only a few model combinations are offered at an all
inclusive subscription price. Unlike the current CbV program, these vehicles will be
delivered direct to customers if at all possible. As Automotive News concluded after
reviewing Lynk’s operations, subscription services “ are poised to fundamentally change auto
retailing.”25 Unfortunately, this type of change will leave U.S. dealers with unamortized
capital costs in plant and equipment which cannot be recovered in a short period, and will
represent a fundamental economic change in existing arrangements between Volvo and its
distribution partners.
VI. CONCLUSION
Volvo initially developed its dealership network because of the understanding that the
manufacturer could not efficiently interface with retail customers directly. It needed
intermediaries with the capital, capacity for risk, and the marketing know-how to distribute
successfully its products in the United States. In order to encourage potential intermediaries
to partner with it, Volvo offered commercial and economic guarantees and incentives

designed to encourage dealership participation in its supply chain. The CbV program
minimizes the value of the existing distribution chain, and puts VCUSA in direct competition
with its dealers. To the extent to which the CbV program is successful, it will effectively
24
Nicola, Stefan, “Volvo’s New Pitch: ‘Don’t Buy This Car,’ Bloomberg Businessweek, Dec 10, 2018,
https://www.bloomberg.com/news/articles/2018-12-11/volvo-s-new-pitch-don-t-buy-this-car.
25
See https://jalopnik.com/2020-lynk-co-01-driving-the-suv-you-can-have-for-a-m-1829633670.
Also, Dowling, Neil, “Volvo Dealers Angry: New subscription service by Volvo slammed for taking sales
off US dealers, GoAutoNewsPremium Newsletter, Dec 13, 2018;
https://premium.goauto.com.au/volvo-dealers-angry/.
14
push existing dealerships out of the new car business, reduce their overall profitability and
erode the economic value of these franchises. CbV represents a fundamental economic
change in the existing relationship between VCUSA and its dealers in California.
Submitted by:
January 15, 2019

Andrew Safir
15
TAB A: Testimony or Depositions within the Past Ten Years
1. Testimony before Regulatory Bodies:
Oral Testimony of Dr. Andrew Safir on Behalf of Shell Energy North America (US), L.P.
before the FERC regarding the request by the California Public Utilities Commission and
California Electricity Oversight Board to have long term power contracts abrogated as unjust
and unreasonable, (EL02-60-007, EL02-62-006, Consolidated), December 2, 2015.
Supplemental Answering Testimony of Dr. Andrew Safir on Behalf of Shell Energy North
America (US), L.P. before the FERC regarding the request by the California Public Utilities
Commission and California Electricity Oversight Board to have long term power contracts
abrogated as unjust and unreasonable, (EL02-60-007, EL02-62-006, Consolidated), July 21,
2015.
Declaration of Dr. Andrew Safir regarding the Report of Keith A. Reutter, Ph.D. Addressing
the Analysis of Recon Research Corporation, before the FERC regarding Tres Palacios Gas
Storage, LLC’s application to abandon surplus storage capacity, Docket No. CP14-27-000,
February 7, 2014.
Economic Implications of Tres Palacios Gas Storage Request for Redefinition of Working
Gas Capacity in Project Facilities; Report by Dr. Andrew Safir and Recon Research
Corporation submitted to the FERC regarding Tres Palacios Gas Storage, LLC’s application
to abandon surplus storage capacity, Docket No. CP14-27-000, January 7, 2014.
Prepared Evidence of Dr. Andrew Safir on Behalf of the Industrial Customers Group before
the British Columbia Utility Commission, Generic Cost of Capital Proceeding, Stage 2,
B.C.U.C. Hearing Order G-77-13, October 1, 2013.
Oral Testimony of Dr. Andrew Safir on Behalf of the Industrial Customers Group before the
British Columbia Utility Commission, Generic Cost of Capital Proceeding, Stage 1, B.C.U.C.
Hearing Order G-72-12, December 19, 2012.
Prepared Evidence of Dr. Andrew Safir on Behalf of the Industrial Customers Group before Recon Research Corporation
the British Columbia Utility Commission, Generic Cost of Capital Proceeding, B.C.U.C.
Hearing Order G-72-12, November 5, 2012.
Oral Testimony of Dr. Andrew Safir on Behalf of the Association of Power Producers of
Ontario before the National Energy Board in the Matter of an Application for Approval of
Restructuring and Mainline Final Tolls for 2012 and 2013, September 14, October 3, 4, 2012
(RH-003-2011).
Updated Reply Evidence of Dr. Andrew Safir on Behalf of the Association of Power
Producers of Ontario before the National Energy Board in the Matter of an Application for
16
Approval of Restructuring and Mainline Final Tolls for 2012 and 2013, August 31, 2012
(RH-003-2011).
Written Reply Evidence of Dr. Andrew Safir on Behalf of the Association of Power Producers
of Ontario before the National Energy Board in the Matter of an Application for Approval
of Restructuring and Mainline Final Tolls for 2012 and 2013, May 11, 2012 (RH-003-2011).
Written Evidence of Dr. Andrew Safir on Behalf of the Association of Power Producers of
Ontario before the National Energy Board in the Matter of an Application for Approval of
Restructuring and Mainline Final Tolls for 2012 and 2013, March 9, 2012 (RH-003-2011).
Oral Testimony of Dr. Andrew Safir on Behalf of Indicated Shippers, before the FERC
regarding a rate proceeding for Enbridge Pipelines (Southern Lights) LLC, January 11, 2012,
(IS10-399-000 and IS11-146-000).
Oral Testimony of Dr. Andrew Safir on Behalf of Imperial Oil before the National Energy
Board in the Matter of an Application by Enbridge Pipelines Inc., November 2011 (RH-1-
2011).
Prepared Cross-Answering Testimony of Dr. Andrew Safir on Behalf of Indicated Shippers,

before the FERC regarding a rate proceeding for Enbridge Pipelines (Southern Lights) LLC,
September 27, 2011, (IS10-399-000 and IS11-146-000).
Prepared Answering Testimony of Dr. Andrew Safir on Behalf of Indicated Shippers, before
the FERC regarding a rate proceeding for Enbridge Pipelines (Southern Lights) LLC, August
16, 2011, (IS10-399-000 and IS11-146-000).
Written Evidence of Dr. Andrew Safir on Behalf of Imperial Oil before the National Energy
Board in the Matter of an Application by Enbridge Pipelines Inc., July 2011 (RH-1-2011).
Affidavit of Dr. Andrew Safir on Behalf of the Indicated Shippers before the FERC regarding
a Complaint against Enbridge Pipelines (Southern Lights) LLC in connection with the

operation of the Southern Lights Pipeline , May 11, 2011 (IS10-399-000 and OR11-9-000).
Written Evidence of Dr. Andrew Safir on Behalf of Imperial Oil before the National Energy
Board in the Matter of an Application by Enbridge Pipelines Inc., June 2010 (RH-1-2010).
Oral Testimony on behalf of the Canadian Association of Petroleum Producers regarding

business risks faced by Alberta utilities in the Generic Cost of Capital hearing before the
Alberta Utilities Commission, Application No. 1578571, Proceeding ID. 85, June, 2009.
Written Evidence on behalf of the Canadian Association of Petroleum Producers regarding

business risks faced by Alberta utilities in the Generic Cost of Capital hearing before the
Alberta Utilities Commission, Application No. 1578571, Proceeding ID. 85, March, 2009.
17
2. Expert Witness Testimony at Trial and Arbitration:
In the Arbitration before the American Arbitration Association in Austin, Texas, SkyVenture
International, Ltd., Claimant vs. Indoor Skydiving Penrith Holdings Pty Ltd., Indoor
Skydiving Gold Coast Pty Ltd. and Indoor Skydiving Perth Pty Ltd., Respondents, AAA Case
No. 01-17-0005-8189, May 9, 2018.
LDJ Investments, Inc., et. al. v. Pro Management Consulting, Inc., et. al.; Superior Court of
the State of California for the County of Los Angeles, Central District; Case No: BC 595171,
September 15, 2016.
Tang Energy Group, Ltd., Soaring Wind Energy, LLC et al. v. AVIC International USA, Inc.
et al., Arbitration No. 01-14-0001-4150; American Arbitration Association, August, 2015.
In the Matter of the Arbitration Between BTU Solutions Group, LLC, Individually and
Derivatively on Behalf of Kemah Ventures, LLC, and Southport Investments, LP, Kemah
Ventures, LLC, Xtreme Salvage, LLC, David J. Houston, Eric S. Schaeffer and Tyson Voelkel
Before Gary McGowan, Arbitrator, November 14, 2014.
Rapid Rack Industries, Inc. (Plaintiff) v. China Export & Credit Corp. and Zhejian Jiaxing
Zhong DA Group Co. (Defendants); Case No. CV11-07785 SJO (MRW), United States
District Court, Central District of California, September 17, 2013.
D'Andrea Brothers LLC v. The United States, United States District Court of Federal Claims,
Case No: 08-286C, October 23, 2012.
Southern Chemical Corporation v. Celanese Ltd, District Court of Harris County, Texas,
190th Judicial District, Cause No. 2007-25490, July 27, 31, 2012.
Falcon Stainless, Inc, v. Rino Companies, United States District Court for the Central District
of California, Case No: SACV08-926 AHS (MLGx), February 14, 2011
USA Capital Diversified Trust Deed Fund, LLC, v. Wells Fargo Bank, N.A., United States Recon Research Corporation
Bankruptcy Court, District of Nevada, Adversary No. 08-01135, July 15, 2010.
Amerind Risk Management Corporation v Brown & Brown Insurance, Inc., and Brown &
Brown of New Mexico, Inc., Second Judicial District Court, County of Bernalillo, New
Mexico, Case No D-202-CV-2007-6470, May 18, 2010.
Editorial Caballero, S.A. de C.V., et al. v. Playboy Enterprises Inc., District Court, Hidalgo
County, Texas, 332nd Judicial District, Cause No. C-762-98-F, April 21, 2010.
18
Emergency Response Marketing, Inc. v. Gulf States Toyota, Inc., Case No. 1220038909;
Judicial Arbitration and Mediation Services (JAMS), Los Angeles, CA, April 15, 2010.
Toby Harris et al. v Investor's Business Daily, Inc., et al., Superior Court of the State of
California, County of Los Angeles, Central District, Case No. BC 269313, March 29, 2010.
19
EXHIBIT G
EXHIBIT H
https://www.bloomberg.com/news/articles/2018-12-11/volvo-s-new-pitch-don-t-buy-this-car
Volvo’s New Pitch:

‘Don’t Buy This Car’
The automaker says selling vehicles via “subscriptions” will help it
build stronger ties to its customers.
By Stefan Nicola
December 10, 2018, 9:01 PM PST
From
PHOTOGRAPHER: LIA KANTROWITZ FOR BLOOMBERG BUSINESSWEEK

Auto ads are nothing if not predictable, trumpeting the design and comfort of
the latest models and urging customers to rush to the showroom. But in
Germany, Volvo’s new campaign says “Don’t Buy This Car.”
Although the tagline sounds like it was drawn from the “never do this” lecture
in Marketing 101, it fits with Volvo’s strategy of steering drivers toward
“subscriptions” akin to streaming services such as Netflix or Spotify. Customers
pay a single monthly bill that covers various fees and repairs—a plan that Volvo
expects to account for half its output by 2025. “It’s very transparent, a hassle-
free way of having a car,” says Volvo Chief Executive Officer Hakan
Samuelsson. “You know exactly what it costs.”
A German ad for Volvo’s subscription service reads: “Don’t buy this car.
Subscribe to it.”
SOURCE: Volvo Cars
After limited trial runs in the U.S. and Europe over the past year, Volvo in
October introduced a nationwide program in Germany, with subscriptions to
virtually all of its models. The monthly cost ranges from €498 ($561), for a
basic version of its XC40 compact sport-utility vehicle up to €929 for a top-line
XC90 SUV with alloy wheels and Nappa leather upholstery. Volvo says a
subscription differs from a traditional lease in that there’s no down payment or
end-of-lease fee, and the price includes insurance, taxes, roadside assistance,
and services such as pickup from your home and mounting and storing your
winter tires.
Volvo isn’t alone in trying subscriptions. Ford Motor Co. offers cars in San
Francisco and Los Angeles starting at about $405 monthly before taxes.
Porsche, Mercedes-Benz, and Cadillac all let drivers in select cities swap out
high-end models multiple times a year for roughly $1,000 to $2,000 a month.
And Li Shufu, the Chinese tycoon who bought Volvo in 2010, is offering
subscriptions via a new brand called Lynk & Co. that targets younger buyers.
The programs highlight efforts by carmakers to stay relevant for a generation
raised on ride-hailing and car-sharing and poised to embrace self-driving
vehicles. In Britain, only 30 percent of 17- to 20-year-olds have driver’s
licenses, down from almost half in the 1990s. And Volvo says that in U.S. tests
of the subscription model, drivers averaged 40 years old, a decade younger
than the brand’s customers. “The car isn’t as important to young people as it
was in the 1980s or ’90s,” says Jan-Philipp Hasenberg, a partner at consulting
firm Roland Berger. “Subscribing to a car is a convenient way to have one
without the financial risk.”
Auto? Nein Danke

The downside for drivers is that car subscriptions are more expensive than
buying or even leasing. In Germany, a lease on a new XC40 starts at about €300
a month—40 percent below the subscription price. Automakers will need to do a
lot more advertising to get most consumers to accept the idea: In a recent
survey by management consultant Oliver Wyman, only a quarter of Germans
and 14 percent of Americans said they would subscribe to a car, and fewer than
half of those interested in the idea said they’d pay more than about €500 a
month. Even at those prices, offering concierge-like services such as tire
changes and drop-offs will make it tough to turn a profit, says August Joas, head
of Oliver Wyman’s global automotive practice. “Adding everything together, I
don’t think this is a great deal for the customer or the company,” he says.
SOURCE: Volvo Cars
Yet what Volvo will get is continuing ties to customers. It won’t have to wait
years for buyers to decide to stick with the Swedish brand when it’s time for a
new set of wheels. And subscriptions will yield rich data on driving habits,
sharing preferences, and wear and tear that could lead to additional services.
Already the carmaker has teamed up with Amazon.com Inc. to deliver online
purchases to the trunks of Volvos in parking lots in the U.S., Sweden, and
Switzerland. “We’re going from being a wholesaler to being a direct business
partner,” says Samuelsson. “It’s a very good way of building customer relations
and securing business over a longer time.”
Felix Müller subscribed to three black XC40s for himself and his three
employees at Techrunners, a startup near Cologne that trains service workers
for cable companies. Müller, who spends about 15 hours a week driving to
clients, says the price doesn’t put him off because he can end or alter the
subscription in two years. And the service package means there’s no need to
invest in fleet management, so his consultants don’t have to skip out on work to
take cars for repairs. “I have the same bill every month, which gives me
planning security for my budget,” he says. “I don’t need to worry about
anything.”
BOTTOM LINE - Automakers say selling cars via subscriptions can help them
stay relevant for a younger generation raised on ride-hailing and car-sharing.
EXHIBIT I
1/8/2019 Care by Volvo subscription service getting an update in February
Search SUBSCRIBE BROWSE CARS MENU PRICES JOIN / SIGN IN
AUTO TECH
Care by Volvo subscription service

getting an update in February
In addition to improving the user experience, these updates
will allow Care by Volvo to offer more of the company's
products.
BY STEVEN EWING | NOVEMBER 30, 2018 12:08 PM PST
Volvo
The Care by Volvo vehicle subscription service is almost a year old

now, and Volvo executives admit they've learned a lot in these first few
months. A number of updates are coming, and speaking to Roadshow
this week at the Los Angeles Auto Show, Volvo North America CEO
Anders Gustafsson says we'll see the first big change in February.
"In February we're going to launch the next platform," Gustafsson told
Roadshow in an interview. "It's really the customer interface," Volvo
https://www.cnet.com/roadshow/news/care-by-volvo-vehicle-subscription-update/ 1/11
Cars CEO Håkan Samuelsson added during the interview.
Regarding the interface, Gustafsson says Care by Volvo will be

updated to better serve the mobile audience.
2019 Volvo XC40 R-Design has black

exterior accents and lava on the floor
27 PHOTOS
"Fifty percent of the cars are subscribed through the mobile phone," he
said. "I would say if you ask me ... it was not on my radar."
Beyond improving the overall user experience, Gustafsson says these

updates will eventually allow Care by Volvo to expand to the
automaker's full range of products.
"When we launch [the update] we have the capabilities to put the total
portfolio into the Care by Volvo solution," Gustafsson said. "That's what
we aim for."
Right now, Care by Volvo is only available for the XC40 crossover and
S60 sedan. And if you order an XC40 through Care by Volvo today,
you won't get it until next year -- the entire allocation of Care by Volvo
XC40s sold out in just four months. With the S60 sedan, Volvo says it
won't have this problem.
2019 Volvo S60: A stylish, comfy

sedan with optional electric boost
27 PHOTOS
SPONSORED
The All-New 2019 Volvo

S60
Designed for effortless power with a
unique expression that stands apart from
the rest.
Paid Content by Volvo
In the future, the company would even like to expand Care by Volvo to
handle used cars. But right now, the main focus is to get the new-car
subscription service right, and roll it out across the United States.
"We've been waiting [to get] the license in every state," Gustaffson said.
"A lot of meetings. I promise you."
2019 VOLVO XC40 T5 AWD MOMENTUM

REVIEW • 2019 Volvo XC40: Like and subscribe
PREVIEW • 2019 Volvo XC40: A big gamble pays off
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This radar detector automatically
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crowdsources speed traps
make this Android HD: more colorful car
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stereo the best?
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Post a comment Volvo Auto Tech Volvo
Next Article: Exclusive: How Tesla tests its cars for extreme cold
EXCLUSIVE | ELECTRIC CARS
An exclusive look at Tesla's

extreme cold testing facility
EXHIBIT J
1/7/2019 Care by Volvo | Volvo Car USA
Care by Volvo FAQs
CARE BY VOLVO
The All New Volvo S60 is now

What makes Care by
Volvo unique
• No price negotiation
• One flat monthly rate with no
surprises
• Includes premium insurance no matter
where you live
• Maintenance and excess wear
coverage
• Upgrade to a new Volvo in as little as
12 months
• Subscribe easily online or via the app
• 15,000 mile allowance per year
Build your own 
https://www.volvocars.com/us/shopping-tools/purchase/care-by-volvo 1/6
What else you get with your subscription
Premium Service and New vehicle 24 7 Concierge

insurance maintenance upgrade Your Volvo
Every plan includes Get factory- Care by Volvo is a Concierge is your
a Liberty Mutual scheduled 24-month personal assistant
insurance policy. maintenance, road subscription plan, for your Volvo online
And the coverage is hazard protection however, you can order. We’ll ensure a
the same no matter and roadside upgrade to a new smooth ordering
Select a Care by Volvo vehicle
S60 XC40
The sleek sedan with ultimate comfort The unique SUV with distinctive styling and
storage
Learn more  Learn more 
Choose your trim  Choose your trim 
SUBSCRIBE IN THE APP 
Here’s how Care by Volvo works:

Complete your subscription in less than 10 minutes from start to finish.
Build your car Confirm details Schedule delivery

Select your trim, then choose Verify your monthly payment Your 24 7 Volvo Concierge will
the color, wheels and interior and reserve your vehicle with a contact you to schedule
styling options to match your $500 deposit that will be delivery with your Volvo dealer.
taste. applied to your first monthly
payment.
Making life less complicated
Answers to your questions
Can I purchase What do I need How does the Can I choose to

additional to qualify for this insurance pay less per
mileage? subscription coverage work? month with a
Your subscription plan? Care by Volvo lower mileage
includes an There are credit comes with a pre- allowance?
allowance of factors and other arranged insurance
Our subscription
15,000 miles per considerations policy with Liberty
ti h
SEE MORE FAQS 
XC40 Disclaimer:
Care by Volvo subscription monthly lease payment of $700 for 24 months, based on $41,945
MSRP of 2019 XC40 T5 AWD Momentum with first monthly payment of $700 due at signing,
and $800 for 24 months, based on $45,740 MSRP of 2019 XC40 T5 AWD R-Design with first
monthly payment of $800 due at signing. For all Care by Volvo offers, lessee is responsible for
excess wear above $1,000 waiver and mileage over 15,000 miles/year at $0.25 / mile. Excludes
taxes, title and registration fees and is available for qualified customers through Volvo Car
Financial Services. Care by Volvo is available at participating dealers. Offer valid for orders placed
by February 28, 2019.
S60 Disclaimer:
Care by Volvo subscription monthly lease payment of $750 for 24 months, based on $46,445
MSRP of 2019 S60 T6 AWD Momentum with first monthly payment of $750 due at signing,
and $850 for 24 months, based on $48,195 MSRP of 2019 S60 T6 AWD R-Design with first
monthly payment of $850 due at signing. For all Care by Volvo offers, lessee is responsible for
excess wear above $1,000 waiver and mileage over 15,000 miles/year at $0.25 / mile. Excludes
taxes, title and registration fees and is available for qualified customers through Volvo Car
Financial Services. Care by Volvo is available at participating dealers. Offer valid for orders placed
by February 28, 2019.
BUILD & PRICE
R EQ U EST A Q U OT E
FIND A DEALER
I N V E N TO RY
OFFERS
EXHIBIT K
EXHIBIT L
EXHIBIT M
EXHIBIT N
CARE BY VOLVO
CNCDA Meeting 04/26/18
CUSTOMER ONLINE ORDER
PROCESS DESCRIPTION
• Customer places order on Volvo website

or iPhone app
• Preconfigured vehicle only
• Dealer defaults to AOR/Zip

• Customer can elect to change dealer
• Order confirmation goes to both customer

and dealer
• It does happen that CbV customers are

converted to in-stock vehicles for
purchase/lease – Not viewed by Volvo as
negative
CUSTOMER CARE
CONCIERGE SERVICES DESCRIPTION
• Assign vehicle to customer order and

dealer
• Confirm payment amount inclusive of

taxes and official fees
• Liberty Mutual Insurance approval and

enrollment
• VCFS Credit approval / Generate CbV

Lease contract
• Scheduling of vehicle delivery with

customer and retailer (Volvo delivery
tool)
DEALER PARTICIPATION
CLARIFICATION
• There is no “participation agreement” for

CbV between dealer and Volvo Car USA
• There is a required addendum to VCFS

Dealer Lease Agreement, however this is
not a “participation agreement”
• Purpose of addendum is to clarify the

dealers role as agent to VCFS in the
lease transaction (see later slides for
detail)
• Dealer does have the ability to “reject”

an individual CbV order/customer today
or in the future for any reason
CbV VEHICLE ALLOCATION
METHODOLODY
• CbV vehicles are incremental to dealers

standard XC40 vehicle allocation
methodology
• Reason is we don’t want CbV to “take

away” from dealer profit opportunity on
traditional sales channels, e.g. every
CbV customers comes with a designated
vehicle
• CA Volvo dealers current allocation of

XC40 based on nation is 10%
• CA Volvo dealers allocation of nationwide

CbV vehicles is 25%
CbV VEHICLE ALLOCATION
PROCESS DESCRIPTION
• After customer order is confirmed, Volvo

will assign factory order number and
assign to dealer as CbV sales type with
customer name
• Vehicle is released to dealer from port

once CbV customer has confirmed
monthly payment amount incl. taxes/fee,
and passed approval by Liberty Mutual
and VCFS (to prevent customer backing
out of deal)
• Dealer has right to reject vehicle

allocation, e.g. floor plan financial hold,
by contacting Regional office
WHOLESALE TRANSACTION
CLARIFICATION
• All CbV vehicles are wholesaled to dealer

in the traditional way
• Vehicle is drafted to dealer’s floor plan
• Dealer receives MSO
• Dealer has right to sell the vehicle per

their choice, although they are
specifically intended for the designated
CbV customer
VOLVO BACKEND MARGIN
PROGRAM DESCRIPTION
• All CbV vehicles are eligible for Volvo’s

standard back-end margin program
• Up to 8% of base MSRP subject to

qualification
• Customer satisfaction is a qualifier,

however CbV customers will not be
surveyed in the traditional way and CbV
scores will not impact the dealers overall
customer satisfaction score
• Subject to possible changes in the future

RETAIL TRANSACTION
CLARIFICATION
• The dealer retails the CbV vehicle to

VCFS Auto Leasing Company
• Purchase price is invoice value, less $80

CA doc fee
• $80 CA doc fee is added to final

disbursement and disclosed to dealer on
Bill of Sale
• Dealer is agent to VCFS in the CbV lease

transaction
• Dealer delivery process (checklist)

LEASE TRANSACTION
CONSUMER DISCLOSURES
• Care by Volvo California lease form

c o m p l i e s w i t h S i n g l e D o c R u l e Cal. Civ.
Code § 2985.8
• Insurance policy is provided to consumer

outside of lease contract – permissible
p e r Cal. Civ. Code § 2985.9
• Vehicle maintenance and wear item

coverage disclosed within lease contract
• No trade-in allowed on Care by Volvo

deals
MAINTENANCE / WEAR ITEMS
DEALER REIMBURSEMENT POLICY
• CbV Dealer service bulletin will be

published
• Volvo Parts reimbursed at MSRP
• Labor reimbursed at Warranty Labor rate

x Volvo standard time guide
• Tires reimbursed at cost (dealer tire)

plus 10% (+ Labor)
• Dealer will claim in Volvo QW90 system

CARE BY VOLVO
Dealer Checklist
VEHICLE
ACTIVITIES RELATED TO THE VEHICLE
• Verify that vehicle has arrived to

dealership
• Verify vehicle condition (e.g. no

damage)
• Ensure PDI is performed (Pre delivery

inspection)
• Full tank of gas
CBV DEALER CHECKLIST

CREDIT VERIFICATION
ACTIVITIES RELATED TO CUSTOMERS CREDIT APPROVAL
• Print Dealertrack credit approval sheet

- Verify if any credit stipulation is
required (ex proof of residence) and
collect from customer
• Print Dealertrack credit application form

(pre-filled version based on customer
online application)
• Verify customer identity (government

issued driver license)
• Ask applicant to sign credit application

form

INSURANCE VERIFICATION
ACTIVITIES RELATED TO LIBERY MUTUAL INSURANCE VERIFICATION
• Request customer to provide Liberty Mutual

Insurance card
• Verify policy effective date

- Do not deliver vehicle prior to scheduled
delivery date in delivery tool/lease contract
date
• Any insurance questions, refer customer to

Liberty Mutual
• Dealer representative should not provide any

insurance information/advice – please always
refer to Liberty Mutual

TITLE/VEHICLE REGISTRATION
ACTIVITIES RELATED TO REGISTRATION OF THE CAR
• Title vehicle in the name of VCFS Auto Leasing

Company as a lease
• Register/Plate the vehicle for the customer
• Vehicle Bill of Sale is provided to show dealer the

disbursement transaction amount details
- All official title/registration fees are included to
dealer in disbursement
• VCFS will handle the remittance of all CA state and

local sales tax

LEASE CONTRACT
ACTIVITIES RELATED TO THE LEASING CONTRACT
• A completely filled out lease contract will be

provided to the dealer for each CbV
customer
• Lessee and co-lessee should initial in all

locations and sign signature section A
• Dealer representative should sign in

signature section B as agent to VCFS
• Collect amount on line 6c (Amount to be

paid in cash) from customer on behalf of
VCFS
• Customer’s $500 On-line Deposit will be

forw arded to dealer by Volvo Car USA

2019-1-15 CNCDA Petition Re Care by Volvo

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2019-1-15 CNCDA Petition Re Care by Volvo

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1 MICHAEL CYPERS - State Bar No.

23 (1) A commercial relationship of definite duration or

3 (3) The franchisee constitutes a component of the

12 (1) The person is authorized to perform warranty repairs

14 (2) The person is not a new motor vehicle dealer

18 Competition Between Manufacturer and Dealer

19 20. Pursuant to VC section 11713.3(o)

20 It is unlawful and a violation of this code for a manufacturer,

23 (o)(1) To compete with a dealer in the same line-make

28 Analysis – AB 225 (Gonsalves).)

17 (u)(1) To unfairly discriminate in favor of a dealership

7 (1) Negotiate the terms of a vehicle sale or lease contract

10 (2)(A) Inflate the amount of an installment payment or

15 Care by Volvo (CbV)

16 itself the seeds of abuse.”).)

25 (“Sigmon Rpt.”) ¶ 9.)

15 (Exhibit B, CbV Announcement to Retailers.)

16 (See Exhibit E, Sigmon Rpt., ¶ 28.)

23 revenue and also increased customer interaction. (Id.)

4 program is bundled and priced violates the anti-payment packing statute.

5 WHEREFORE,CNCDA prays as follows:

6 Request for Relief

10 fair competition and to protect the public. CNCDA respectfully requests:

i. That the Board provides relief available under VC section 3050(c)(1) by

v ~4 that the DMV investigate, or

17 motor vehicle manufacturer license of Volvo (License No. 49551); and

20 DATED: January 15, 2019 Respectfully submitted,

21 GLAS EIL FINK HOWARD

This document is for Volvo field representatives and retailers only.

Care by Volvo Launches in the United States on November 29, 2017

Advantages for Volvo Retailers:

Care by Volvo will provide the following advantages to retailers:

What the Customer Experiences

Vehicle Selection & Ordering Stage

What is Included in Care by Volvo

Margins, Commissions & Other Financial Support

New Car Profit Impact

Vehicle Upgrading During Subscription Term

Pricing will be announced at the LA Auto Show on November 29, 2017.

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Brian Maas, President

Dear Mr. Maas:

Thank you for your letter dated March 29, 2018.

VOLVO CAR USA, LLC

Coercion of retailers into taking delivery

Violation of consumer protection laws

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Re: Response to April 6 letter on Care by Volvo

Dear Mr. Gustafsson:

Thank you for your letter dated April 6,2018.

VIA FEDERAL EXPRESS AND EMAIL

Re: Care by Volvo

At our Thursday, April 26 meeting, we were encouraged by Volvo leadership's statement

2. Statements made by Volvo in CbV advertisements on customer "down payments" creates

VIA FEDERAL EXPRESS AND EMAIL

Re: Care by Volvo

Dear Mr. Gustafsson:

Given these ongoing compliance concerns, we ask that Volvo:

Enc: CNCDA letter Re: Care by Volvo, May 1, 2018

VIA FEDERAL EXPRESS AND EMAIL

Re: Care by Volvo

At our Thursday, April 26 meeting, we were encouraged by Volvo leadership's statement

2. Statements made by Volvo in CbV advertisements on customer "down payments" creates

Re: Care by Volvo

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