With sheer dealer lots, car buyers turn to Build-To-Order – Forbes | Car Plazas

Auto Dealer Ford NJ
Buyers come to dealerships to find far fewer cars than before Covid-19. Some will process order-related (or order-related) work orders. Delivery times can be 4 to 12 weeks. Here, a dealer in New Jersey. Bill Howard

The lot at Suburban Ford of Ferndale, Michigan should be packed with new SUVs, vans and pickups as the dealership prepares for the spring selling season. Instead, buyers will currently only find a handful of deals in 2022, regrets sales manager Brycen Collins.

For now, Collins and his team have few options to offer potential customers: choose from the limited on-site selection, wait for a car transporter to come out of the factory to see if there’s something they’d like, or order in Custom vehicle and hold until it is delivered, a process known in the industry as ‘build to order’. BTO is also called order-to-delivery or pre-order.

BTO is the future: Ford CEO Jim Farley said: “A third of our sales are now order-to-delivery. It used to be less than 5%.” During an earnings call in January, GM CEO Mary Barra said bluntly, “We’re never going back to the stock levels we had.” Before Covid, a dealer would have enough cars on hand to sell 60 to to survive 70 sales days.

Delivery time: 4 to 12 weeks. Sometimes more.

Delivery times for a BTO car can range from four weeks to up to 12 weeks. Despite the wait, a new study finds that four in 10 car buyers plan to pre-order their next new vehicle.

The auto industry has taken a hit since the Covid-19 pandemic two years ago. In March 2020, factories across North America were closed for three months. After the lockdown, factories have been working overtime but have been slowed down by semiconductor shortages that are ongoing this year. AlixPartners estimates that global auto production in 2021 fell 10 million short of original plans to reach 70 million and could fall again this year.

New vehicles are in short supply across the country, said Tyson Jominy, an analyst at JD Power. Where there should currently be more than 3 million new cars, trucks and crossovers on dealer plazas, there are less than 1 million and he doesn’t expect the situation to improve until “late 2022” at the earliest.

The internet has helped by giving buyers the ability to search the inventory of multiple retailers. Many new car buyers are now opting for used cars, especially new, certified used cars that have been extensively checked and, if necessary, repaired. Analysts say CPO is a good way to buy a near-new car, especially when new car prices are over $45,000.

But more and more are pre-ordering. About 41% of respondents who responded to a December 2021 survey by shopping site Cars.com said they plan to have a vehicle built to order next time they hit the market.

car transport ship
Car carriers – formerly pure car carriers, known for their high side walls – transport 2,000 to 8,000 vehicles. Crossing the Atlantic or Pacific takes 10 to 20 days. A car transporter from Europe can load in up to four ports and then unload in half a dozen ports in the United States. From the first port of loading to the last port of unloading, it may take a month. All of these variables affect how long it takes to get a BTO vehicle. bmw

This is how build to order works

More and more automakers are setting up websites that make it easier for buyers to navigate the BTO process. They know that a vehicle built to order can benefit everyone. Consumers can choose the exact model, options, and color they want. The website shows the stages of the production process. It is sometimes possible to make a color or option change after the order has been placed up to a blackout date.

There is a downside. At best, it takes four weeks to receive a custom car from a factory in the US or Canada. For cars from Europe and Asia, it can be eight to twelve weeks. It could be longer: The stated lead time often starts when the factory receives the order and plans production, which can take several weeks after a customer places the order.

There are other variables: some factories group BTO cars into batches for production. Some automakers are more efficient in the logistics of BTO planning and production processes; this could become a competitive advantage in the future. A car ferry from Europe or Asia takes 10 to 20 days to reach the US and can drop off cars at half a dozen ports. From there, the cars are checked in the port of entry, repaired if necessary and then transported on by truck, sometimes by train. Delays in port and bad weather en route can take several days. If a customer’s car arrives at the port of departure the day before final delivery and is unloaded at the first or second US port, it may arrive earlier than expected.

“Americans are generally boisterous people and don’t like to wait,” said Gary Silberg, automotive lead at KPMG.

The actual time to build your new car? After the sheets are welded and bonded into a recognizable car body and then painted, it takes about a day for the paint to dry and another day on the production line for assembly. It may be tested for water resistance and it may be driven for a short time. But it’s not final assembly that creates long lead times.

Why BTO benefits automakers

While there is general agreement that build-to-order is becoming more popular, the question is will things ever return to the old normal.

The build-to-order process has a number of advantages for the industry. Dealers do not have to keep as many vehicles in stock, which reduces inventory costs. And automakers can match production to actual market demand, rather than guessing what to build and then ship to dealers.

Analysts like Power’s Jominy expect there to be anywhere from 30 to 40 days of unsold models in the future. Before Covid-19, stocks typically ran for 60 to 70 days. That would likely encourage more buyers to go the build-to-order route.

Less inventory along with less incentives

But that won’t be the only long-term change on the trading side. Over the past two years, automakers have scaled back the stimulus that has been common since the old Chrysler Corp. 1975 told customers, “Buy a car, get a check.” Also, more cars are selling for more than list price.

“Think back to two years ago,” said Dave Gardner, Honda’s executive vice president of US operations. “When have you ever heard of cars being sold at MSRP? Well, that’s the start of the conversation.”

Premiums have pushed new car prices to all-time highs. The average transaction price — which accounts for options, incentives and premiums — hit a record $47,243 in December, according to Kelly BlueBook. That fell 1.8% to $46,404 in January, the service reported, but that largely reflected a decline in luxury car sales.

Even with the current shortages, dealers and automakers alike have made record profits. And they don’t want to go back to the old ways. “We will not return to excessively high inventories that depress new-vehicle margins,” said Mike Manley, the former CEO of Fiat Chrysler who now heads AutoNation, the country’s largest dealership group.

Biden F-150
Pre-orders (with refundable deposits) helped boost the profile of Teslas and, more recently, electric pickups and SUVs. Last fall, President Biden got behind the wheel of a Ford F-150 Lightning prototype. Ford closed pre-orders last December after taking nearly 200,000 reservations. Ford says first deliveries will be this spring. Nicholas Kamm (AFP) via Getty

Pre-orders increase interest in high-quality electric vehicles

A variant of pre-ordering is the advance deposit system to get a place in the queue for high-profile cars, especially electric vehicles. Tesla did it for the Tesla Cybertruck, Semi, Roadster and Model 3. Now Ford and GM are taking pre-orders, specifically for EV pickups, including the Ford F-150 Lightning pickup, GMC Hummer pickup and SUV, and Chevrolet Silverado EV pickup, as well as the gasoline-powered Ford Bronco, Forbes Wheels SUV of the Year 2022.

The deposits are refundable but indicate demand, and the majority are turning into firm orders, automakers say. In the case of the Tesla Model 3, the company began taking deposits in early 2016 and by the end of 2017 had generated more than half a million pre-orders and reported at least 70,000 cancellations. Deliveries began in small quantities in late 2017; It is now the best-selling electric vehicle in the US

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