Jan 3, 2022 - Economy & Business

Car shortage could change buying behavior forever

Illustration: Gabriella Turrisi/Axios

Car dealers' annual year-end sell-a-thons have turned into wait-a-thons for many shoppers unable to find the vehicle they want on dealer lots — but that could be about to change as some companies modernize the way they sell their cars.

Why it matters: Supply chain disruptions could have a silver lining for automakers if Americans can be trained to order the exact car they want — color, features, bells and whistles — and then wait a month or so for it to be delivered.

  • This is how Europeans have been buying cars since World War II, when money and materials were in short supply and factories were struggling to recover.
  • But Americans are accustomed to going to the dealership and driving home in a shiny new car off the lot.

What's happening: Some companies say they plan to capitalize on the inventory crunch to permanently shift to an order-based system, starting with their new lineups of electric vehicles.

  • Ford Motor, for example, is trying a build-to-order scheme with its new Mustang Mach-e, which is in high demand.
  • And Ford is offering a $1,000 discount to customers who pre-order any vehicle.

What they're saying: "You cannot imagine ... how much money we waste by not -- by guessing what our launch mix is for a new product," Ford CEO Jim Farley told investors and analysts in October.

  • A build-to-order model, he says, is a far more efficient way to run the business.

Between the lines: Packing lots with large numbers of cars, trucks and SUVs is a huge drain on profits for both dealers and automakers.

  • Dealers have to cover the cost of financing all those cars sitting around, waiting for a buyer.
  • And automakers usually wind up producing more cars than they need to, in hopes of satisfying every shopper's desire. That means more parts, more labor and more cost.
  • Inevitably, though, they end up spending more on advertising and incentives to clear out the slow sellers.

Yes, but: Automakers have tried before to switch to a build-to-order model, with little success.

  • "Americans have no patience. We're too impulsive," said Michelle Krebs, executive analyst at Cox Automotive.
  • "Right now, we’re in an unusual situation, so people are putting their dibs in," says Krebs. That doesn't mean it's a new business model.

It's been a hard lesson for newcomers like Polestar, the Swedish electric car manufacturer spun off from Volvo, which had to tweak its U.S. strategy.

  • It had planned to deliver customer-ordered vehicles to stores, which would carry no vehicles on their lots.
  • But franchised Polestar dealers discovered impatient buyers wouldn't wait, and they risked losing sales to competitors.
  • Now, Polestar furnishes retailers with five to seven cars for spot deliveries.

The bottom line: The pandemic finally made it possible to complete your car purchase online without ever setting foot in a showroom.

  • The big question is whether ordering the exact car you want from the factory is next.

Editor's note: Cox Automotive's parent, Cox Enterprises, is an investor in Axios.

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