Online sales channel is enticing to Volvo for overseas market

A standard version of the Volvo XC90 was presented at the Paris Motor Show in 2014. A limited edition of the SUV sold out within two days in an online promotion.

Volvo’s online sales experiment last year, in which 1,927 limited-edition XC90 SUVs sold out within 47 hours, showed the automaker there’s great consumer interest in skipping the dealership and buying vehicles on the Internet.

Most of the cars were reserved within one hour from the start of the sale, which was available only to overseas buyers. At its peak, seven limited-editions were being sold every minute.

That kind of success has Volvo eyeing online sales for all of its models overseas, according to a report in The Economist magazine. But selling cars online in the United States could be tricky.

That’s because most states, including South Carolina, have laws designed to protect automobile dealership franchises from direct competition from manufacturers. In other words, Volvo — which is building its first U.S. manufacturing plant in Berkeley County — can’t set up its own brick-and-mortar shop to sell cars directly from the production line.

That sales model is being tested by Tesla, the electric car manufacturer that wants to open its own sales shops in several states. New Jersey and Maryland recently overturned bans on such sales, and laws are being challenged in at least five other states, but not South Carolina.

“We haven’t committed anything publicly as to when or if we’ll have the entire line online,” said Jim Nichols, a spokesman for Volvo Cars North America.

Nichols said the company is working on a process where consumers could make their car purchases online and then have the deal finalized at a local dealership.

“Our retailers are very important to the customer experience and you need those local retailers to service the vehicle,” Nichols said. “They are the front line of customer experience.”

Nichols said many Volvo customers already use the Internet to at least get a sense of the type of car and features they want to buy. Online sales are the next logical step.

“A lot of customers are showing up at our retailers already having researched the vehicle online, so the customer is already moving toward using the Internet as a tool in their car-buying decision,” Nichols said. “So I don’t think it was too much of a surprise to see the response that we got from the (XC90) first edition sales.”

Robert Green, a Greenville lawyer who specializes in business and transportation litigation, said online Volvo sales probably wouldn’t run afoul of state law if a local dealership handled the final paperwork.

Most consumers prefer to spend as little time as possible at a dealership. Accenture, a consulting firm, recently surveyed 10,000 people in the U.S. and a handful of other countries about buying cars. Three-fourths of them said that “if given the opportunity, they would consider making their entire car-buying process online, including financing, price negotiation, back office paperwork and home delivery.”

Another survey by Autotrader showed just 17 percent of consumers like the way car-buying is handled today.

It’s not clear what the South Carolina Automobile Dealers Association thinks of the online sales idea. Sims Floyd Jr., the association’s executive vice president, did not respond to several inquiries last week.

As a whole, though, dealerships are wary of online sales because of the threat they pose to their bottom line.

Reach David Wren at 937-5550 or on Twitter at @David_Wren_