Volvo Cars South Africa is facing a major backlash following the announcement of a downsizing restructure process that will see it closing dealerships outside of the major urban areas.
Last week, the union representing the majority of Volvo’s dealer employees, the Motor Industry Staff Association (MISA), criticised the importer over a lack of transparency surrounding the restructure, of which its members were not informed ahead of a statement being issued to the media.
Further to that, numerous dealerships are accusing the importer of leaving them high and dry, while also creating uncertainty among customers outside of the major centres.
Two months after it began consulting with some of these dealerships, Volvo Cars SA remains unable to confirm exactly how many dealers will be closed as a result of the restructure. However, multiple sources are indicating that the total will be cut from 19 to just seven new vehicle sales facilities, covering only the country’s three major metropolitan areas: Joburg/Pretoria, Cape Town and Durban.
Our sources indicate that Volvo Cars provided a 90-day notice period to affected dealers, with some being informed in late December and others later in January.
At least two of the dealership representatives told IOL that the Volvo Cars head office had already collected vehicles from their facilities, ahead of the agreed upon closure dates, leaving them with empty showrooms. This is due to the company having ended its consignment policy in January, meaning dealers would be required to buy the stock which they wish to carry.
One dealer manager told IOL it simply would not make sense to purchase stock so close to the closure date, as there was no guarantee that the vehicles would be sold in time.
The manager feels Volvo has left the business high and dry as they have invested more than R10 million in dealer upgrades over the past four years and will only recoup around R500,000 in parts buy-backs following the closure.
How will Volvo customers be affected?
The manager of another dealership said his company has been left in the dark as to Volvo’s plans to mitigate the effect of the restructure on customers outside the major metros.
“For us as a group we have an obligation to communicate with our customers transparently,” the dealer representative told IOL.
“For now, we just need to know, what is the plan for consumers whose cars are still in warranty? Volvo has not announced any kind of plan as yet.”
This is a particular concern for customers who live hundreds of kilometres away from major centres such as Joburg, Durban and Cape Town, as they would theoretically need to travel large distances for service and repair work.
IOL has approached Volvo for comment and is still currently awaiting feedback on its plan to mitigate the logistical concerns for customers based in areas outside the major cities. Indications are that a plan is in the works, and this report will be updated as soon as feedback has been provided.
Some of the dealers which we spoke to, which were located outside the metros, indicated that they would continue to provide service and repair back-up to owners of older Volvo models that are out of warranty.
One, however, said Volvo was attempting to use its franchise agreement to buy back specialised workshop tools from them at a highly depreciated price.
Volvo responds
IOL also approached Volvo Car for commentary on the scale of its restructuring operation, and the company provided the following statement, but reiterated that it was too soon to elaborate on the exact dealer plan going forward.
“Volvo Car South Africa (VCSA) is conducting a strategic review of its dealer network. As the licensor of the Volvo brand, VCSA has been actively consulting with its independent licensed dealers.
"Any dealers affected by the review will independently evaluate their operational position and commercial strategy. VCSA remains committed to a transparent and fair process in all its discussions with independent dealers.”
The company’s public relations representative said it would provide further details on the restructure in due course.
It is believed that the restructure is taking place largely due to Volvo’s transformation into an all-electric car company, which is expected to, at least initially, result in a smaller sales penetration in markets such as ours. This restructure only applies to Volvo Cars SA and not Volvo Group Southern Africa.
The latter, which employs 750 staff in South Africa, is the custodian of Volvo Trucks, Volvo Bus, Volvo Penta and Volvo Financial Services. Although sharing a common brand, it has been a separate legal entity from Volvo Cars since 1999.
IOL