Volvo dealers weigh the idea of more custom-ordered cars

Volvo is experimenting with a new distribution model as it pivots into an all-electric brand in less than a decade.

The Swedish automaker said last year it would switch to a “central stock” model for its BEVs, in which Volvo would carry inventory on its balance sheet and deliver customer-ordered cars to dealerships.

Central stock addresses two dealer pain points: the heavy cost of floorplanning hundreds of vehicles, and the complexity of predicting the right combination of options that would sell.

“Volvo dealers are cautiously optimistic about the potential savings and efficiency that central stock brings,” Volvo Retail Advisory Board Chairman Ernie Norcross, 60, told Automotive News.

But that strategy has butted into the realities of the U.S. market.

American shoppers, unlike Europeans, are usually unwilling to wait weeks for built-to-order vehicles to arrive from the factory. U.S. car buyers expect breadth and depth in vehicle selection.

For many people, a new vehicle is the second-largest purchase in their lives, said Norcross, owner of Volvo Cars Memphis in Tennessee.

“They want to drive it, they want to feel it, they want to smell it,” he said.

Volvo dealers feared that not having a lot full of new cars would put them at a competitive disadvantage to the Mercedes-Benz dealer down the street who might have 300 cars on the lot.

“We need some inventory on the ground for the spur-of-the-moment impulse buyer,” Norcross said.

So Volvo pivoted to a “consignment stock” model — supplementing customer-ordered cars, with a few vehicles for test drives and impulse buyers.

“Dealers could either sell those cars to the customer or order the color they want out of central stock,” Norcross said.

Volvo had planned to sell the 2022 model year XC40 Recharge P8 battery-electric vehicle via a consignment stock model.

But the industrywide inventory crunch has delayed the rollout.

“We can’t do central stock until we get a satisfactory amount of vehicles built,” Norcross said. “It’s kicked the can down the road until at least the 2023 model year.”