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Nick Connor

VOLVO Car Australia’s new managing director Nick Connor plans to broaden the retail network and work on improving dealer profitability and facility standards where needed as part of the company’s strategy to increase annual sales to 10,000 units by 2020 – up from less than 4700 last year.

Mr Connor, who has extensive experience in Europe and the United Kingdom, also plans to introduce the ‘Care by Volvo’ subscription service over the same timeframe.

This operates like a mobile phone plan whereby the customer signs up for a two-year or three-year contract and pays a monthly fee that covers basically everything except fuel or electricity.

In an interview with GoAutoNews Premium, Mr Connor said that he had not yet visited every one of the 27 dealers across the network – “That’s on my to-do list” – but said that his focus for Volvo dealers was on creating a “viable business model” that builds profitability and, at the same time, raises standards.

“Honestly, it’s like a lot of markets around the world, there’s some really outstanding representation and there’s some that needs to be improved, so it’s a mixed bag,” he said.

“I wouldn’t expect anything else, in all honesty. To be brutally honest, the network have not been hugely profitable over recent years and asking dealers to invest in new showrooms and new furniture doesn’t stack up unless the dealers see a return.

Volvo XC40

“So I’m very focused on making sure that our dealerships represent us in the best way possible, but that they have a viable business model because it doesn’t do anyone any good at all to put, to heap, huge investment pressures on the dealer network that isn’t supportable by the volume.

“And I don’t believe that it’s all about the size of the showroom – I think it should be about having a very nice Scandinavian feel to the showroom.

“Customers buy cars from people. They want to have a nice experience. They want to be treated well. Yes, they want to go somewhere that looks smart and clean and tidy and represents the brand image. But it doesn’t have to be a hanger with 40 cars in it.

“For me, it’s about having a scalable offering, and in some rural areas two- or three-car showrooms are going to be fine. But in a major metropolitan area like Melbourne or Sydney, then we’re going to ask for a bit more,” he said.

“But it should be appropriate to the return available to the dealer network.”

Mr Connor said the company had identified gaps in the network, and while not prepared to discuss specific locations, he indicated that the east coast was an area of focus.

“We have got some gaps. There are a few formal and not so formal open points, I think. Going up the east coast of the country there are some obvious areas where we simply have no representation at all,” he said.

“Our objective is to fill in those gaps in the right way, and it might be that in some areas it’s simply a service point rather than a full dealership.

“Even for the volumes we’re doing today we’ve got some gaps, but certainly if we’re looking to grow our volumes beyond 10,000 units, then we need a few more physical presences out there – and we are working on that.”

He said that somewhere around 30 to 33 dealers for Volvo Cars would be an appropriate level – a return to the size of the network a few years ago.

How Care by Volvo would work in Australia

Mr Connor said that under the ‘Care by Volvo’ program, the subscription service would be “one of a suite of offers” available to customers, packaging together many of the major elements of car ownership including insurance, servicing (including pick up and return), maintenance (including tyre replacement) and repairs.

In overseas markets, Care by Volvo also includes access to various digital concierge services such as parking reminders, shopping delivered straight to the vehicle’s load compartment, and so on.

“It’s a very customer-friendly model,” Mr Connor said. “We’ve launched it in a number of markets around the world – I think it very much suits a cash-rich/time-poor type audience and I think there’s an opportunity for it here.

“How big that opportunity is remains to be seen because as far as I can see, no one’s really doing exactly that sort of offer here at the moment, and I expect in the early days it’s going to be a relatively small percentage of our sales.

“But I think certainly younger customers are used to this subscription model for their mobile phones. They are used to paying $100 a month, or whatever it is, for their iPhone with data, and I think car usage is moving that way around the world.”

Mr Connor added that “when, and how fast it moves towards that model, is yet to be seen”.

Asked whether it could be launched locally within a couple of years, he said: “Yeah, absolutely. I’d like to introduce sooner rather than later, so that we have the offer in our portfolio for those customers who want it.

“I certainly think within two years, that’s a very sensible timeframe.”

Boost for financial services

In studying the Australian market since his appointment in March, Mr Connor has also seen an opportunity to grow Volvo’s financial services business.

“We don’t have the spread of financial services offers here that I’m used to, so I think the financial services market is still a little underdeveloped,” he said.

“From what I can see, the Australian tendency is to buy cars outright, or if they’re going to finance it, it’s going to be on hire-purchase-type finance – long-term loan financing rather than the PCP (personal contract purchase) or GFE (good faith estimate) type products that have been so successful in the US and Europe.

“I think there’s an opportunity there to grow our finance penetration here but, of course, that’s not going to be led by Volvo. That’s going to be led by the market, frankly, and customers deciding that they want to fund their car purchases in other ways.”

By Terry Martin

KPMG
Macquarie