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Car shortages could forever change car-buying behavior

January 7, 2022
The annual year-end sell-a-thons by car dealerships 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 dealerships 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.
It 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 off the lot in a shiny new car.
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, 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.
"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 said, is a far more efficient way to run the business.
Between the lines: Filling 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.
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," said 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 a car purchase online without ever setting foot in a showroom.
 
The big question is whether consumers ordering the exact car they want from the factory is next.
 
 

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