If demand is high enough for a product, then people will line up to buy it. That’s where the auto industry is right now. People need vehicles and the supply is unable to meet that need.
This demand is perpetuated not necessarily by buyers, but by the car companies. It’s not that automakers don’t want the business (more volume), it’s just that supply-chain issues are hampering the ability to build enough vehicles.
For dealers, the lower volume has a silver lining. There’s less inventory to carry, and vehicles that are ordered are reportedly selling at full sticker price. Less work for more money is a good thing, and dealers likely have a clearer picture of sales volumes because customers are queued up in advance.
Why can’t this be the business model for all automakers, then? Brands such as Tesla and Apple can only be purchased this way, after all.
It’s a valid question. Building to meet demand has obvious advantages but also some pitfalls. The question is whether those pitfalls — making customers wait, for one — are worth it.
The COVID-19 pandemic has conditioned people to wait longer than normal to receive products and services. That doesn’t mean people like it. In fact in the adjacent column, Digital and Mobile Editor Greg Layson echoes the sentiment of many consumers when he says he hates it.
Point being that once the supply chains are sorted out and the capability to produce more vehicles returns, the auto industry will be hard-pressed to keep customers waiting. The competitive nature of the industry — car companies cranking up factories to battle for market share — might even make that impossible.
For example, will customers be willing to wait a year for a Cadillac Lyriq if a suitable competitor is available sooner? No disrespect to the Cadillac brand, but at the end of a four-year lease for their current vehicle, what customer would go without another vehicle for a year? No one.
Basically, unless the entire industry bands together to limit inventory levels — think of OPEC’s grip on oil production and how that falls apart from time to time — there will be no way to keep customers on waiting lists, unless it’s for a very specific high-interest vehicle.
That’s not to say there aren’t some best practices that could or should be adopted from the current situation. The reason customers were buying off the lot in the first place and not ordering is because — spoiler alert — the order process takes too long. With a stocked lot of cars from which to choose, close is generally good enough.
Over the past year or more, customers have been forced into the order process, but if automakers and dealers want to keep that going — the business benefits are probably worth the attempt — then they have to do one thing: build to order a lot faster (to keep annoyed customers such as our Digital and Mobile Editor Greg Layson happy).
Every dealer should be pushing every automaker to optimize if not revolutionize this process.
Why? If you told me I could have the exact vehicle I wanted within two or three weeks of ordering, then guess what, I’m not even thinking of buying off the lot. Everyone wins.
What some people might miss when drawing comparisons to Apple is that the exact iPad or MacBook needed is probably not in stock at the local store, but is only a week or two away with a custom order done from home. Or at least it was before the pandemic. People are not angrily waiting as much as they are willingly waiting.
The order process for a car cannot take months to complete. Cut the wait. That’s a lesson car companies can adopt when their full capacity returns.