Build-To-Order May Not Be Built To Last

Customers can wait for just the right vehicle to show up on the lot, or order a custom one that oftentimes comes with a months-long wait:

Urban Science, Autos

11/17/2021 7:38:00 PM

Customers can wait for just the right vehicle to show up on the lot, or order a custom one that oftentimes comes with a months-long wait:

Production cutbacks caused by the Covid-19 pandemic and global semiconductor chip shortage have led to sparse dealer inventories and sparking a move to a build-to-order model. But studies show consumers may not warm up to waiting many months for their new vehicles.

Will consumers go along with the notion of order and wait? It's not a new option. Car shoppers have been able to customer order vehicles for decades, but will they go along with that being the primary option? Maybe yes, maybe no.Matt Desmond, Automotive Principal Industry Analyst for global consultants Capgemini Americas says his company's intelligence points squarely on the side of definitely yes, in large part due to consumers becoming accustomed to waiting for things during the pandemic but also as a means of self-gratification.

Matt Desmond, Automotive Principal Industry Analyst for Capgemini AmericasCapgemini Americas“This new paradigm is essentially the excitement of waiting,” said Desmond in an interview. “Some people are very happy to brag on social media about putting in a reservation or a deposit which is usually fully refundable, almost like no commitment. So you shop, you wait, you say it's coming it's exciting. That has essentially been adopted by these more traditional companies who say we can do it too.”

But twin studies conducted last June surveying attitudes of both dealers and consumers show diverting sentiments regarding BTO and the willingness to wait more than two or three months for a vehicle and dealer perceptions of that willingness.In a survey of about 90 dealers conducted by Urban Science, and a separate consumer survey headtopics.com

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Urban Scienceconducted with The Harris Poll only 28% of consumers said they're willing to wait for their vehicle beyond two or three months.The willingness to wait months for a new vehicle varies by age group according to a study by Urban... [+]Science.

Urban ScienceThat willingness varies by age group with older shoppers the most patient. Specifically, 42% of those identified as Baby Boomers ages 57 and older said they're willing to order and wait for their vehicles, while the younger segment of Generation Z, ages 18-30 were the least patient with only 15% saying they're fine with waiting months.

The studies also found a big disconnect with the perception dealers have on whether or not their customers are willing to wait many months for a vehicle they ordered.While 58% of dealers believed customers are willing to wait for their vehicles, only 28% of the consumers surveyed said a months-long wait was fine with them.

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Rick Twydell, Urban Science global practice directorLinkedin“It's not waiting three months, pushing six months and beyond for a lot of people. People are getting frustrated and moving on to doing something else to get the vehicle sooner,” said Rick Twydell, Urban Science global practice director told Forbes.com. “I think there's a fine line of how long people are willing to wait. Perceptions are changing because people are forced to wait because the product is just not there. People still want that immediate gratification.” headtopics.com

Automakers and dealers also enjoy gratification, especially the financial variety. Both Desmond and Twydell agree the build to order business model gives automakers the opportunity to better focus production and purchasing to vehicles consumers actually desire.

“If a new vehicle hits the line and doesn't sell quickly value can decrease over time, so the interest is to market it, get the order and deliver it exactly to the customer's specifications,” said Desmond. “It also helps automakers optimize their marketing budgets.”

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For dealers, by stocking fewer vehicles on their lots, their costs are greatly reduced but that does not come without risk.“Depending on the dealers you talk to, they're still uncomfortable about not having vehicles on their lot,” observed Twydell. “Inventory used to be a competitive advantage for a lot of the larger dealers to offer a greater selection.”

Sparse inventory on dealer lot in Troy, Mich.Ed GarstenBoth analysts believe the new model will still involve on-site vehicles for those who can't or won't wait, just not as many on some lots.What happens when the pandemic fades and the chip shortage is solved? It's too soon to know for sure and opinions differ. headtopics.com

“I don't think this is going away because new market entrant competitors will continue to offer it and I really think it's fundamentally changed the landscape. As an option I think it will definitely remain,” predicted Desmond who termed the move to BTO a “sea change.”

Urban Science's Twydell isn't as convinced because there's a large segment of consumers who still demand instant gratification, however, “I think it definitely is going to have legs beyond the pandemic. I don't think it's going to be the dominant approach for most people. I still think it's going to have a larger footprint than it did in the past.”

For car shoppers the greater move to build-to-order just may spark a slight twist to the lyrics of that long ago BTO tune, where they're “taking care of business....but waiting overtime.”

Read more: Forbes »

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