Alain Visser, a veteran executive with experience working at Ford, General Motors and Volvo, has been Europe CEO of Zhejiang Geely Holding startup Lynk & CO since 2015. Instead of creating a traditional dealer network, Lynk & CO will offer subscriptions to customers, market its cars online, and sell through branded flagship stores and so-called "pop-up" stores. The company began sales in China last year and plans to enter the European market in 2020 with the 01 compact crossover, which shares its architecture with the Volvo XC40. Visser spoke about Lynk & CO's next steps with Automotive News Europe Correspondent Peter Sigal.
What is the status of Lynk & CO's activities in Europe?
The plan is still to start producing the vehicles for Europe in the second quarter of 2020. Not in Ghent [Volvo's Belgium factory], but in China. That is the only thing that has changed. We decided to produce in China for the simple reason that the Volvo XC40 was doing so well that we couldn't get the allocation in the [Belgian] factory that we think we need for Europe. We would have had the prospect of having two production plants, Ghent and China, which is a major confusion and cost complication. The rest of the plan is intact. We will open a store and launch in Amsterdam next year, then we will go step by step to other major cities.
With your subscription offer, is Lynk & CO going to position itself as a mobility company?
Automakers risk being mere suppliers to companies that offer more mobility options. That could be their choice -- but among volume manufacturers it will be about who offers the lowest price. That puts long-term profitability at risk. It's better to become a mobility company yourself.
Do you know how much consumers are willing to pay for mobility?
We have done research in Europe and the U.S., and we have found that it is very, very high, about 500 euros a month. And, this is from people who say, "I can't afford a car," but then they take taxis, they use Uber and public transportation -- and you add it all up, and it's 500 euros. But they are not aware of it. However, if you buy a car and your lease contract is 500 euros a month, then you know you are spending the money.
How many subscriptions do you expect?
By 2021, we are planning for a total volume of 500,000 vehicles annually. In China the majority of that will be sales. In Europe the percentage of subscriptions is to be determined.
What will subscriptions cost?
We haven't disclosed the pricing. But it definitely won't be 250 euros. That's too low.
Is there a sweet spot for the length of a subscription?
The honest answer is: We don't know. Our research shows the biggest issue today for the traditional buying and leasing model is that young customers don't want to commit to a long-term investment. We believe that the ability to stop our lease at any time is the trigger to get people on board.
What will you do with cars when the subscription ends?
We will offer them to subscribers again, but on a sliding scale. If you subscribe to a car for five months and say, "I really don't need it anymore," we take back the car. The next customer could have a choice of taking a new car for 500 euros a month, or a six-month-old car for 400 euros.
So the cars have to be durable and very well built, right?
Exactly. It's always a bit provocative when I say this, but there is something not very ethical about the car industry. We have traditionally made money on servicing cars, not selling them. So, we make money on making customers do what they hate most, which is going back to dealers. But for us, that's where we lose money, because in a subscription the service is part of the cost. So the more our cars need repair, the less we profit.