Tesla Model 3 Proves That U.S. Buyers Want Made-To-Order Cars

1 year ago by Steven Loveday 44

 

Tesla Model 3

Tesla Model 3

While other automakers are hanging on to the traditional dealership model for vehicle sales, Tesla has collected nearly 300,000 deposits for the Model 3 in 3 days. The $1,000 deposits will give the company some extra money to throw around for the next 2 years as buyers wait for delivery.

Tesla Model 3 Interior

Tesla Model 3 Interior

The current system for sales, used by the other companies, has stuck for years and years, despite its obstacles. Cars must be built ahead of time and stocked, so space and unsold inventory is a huge issue. Last month it was reported that U.S. automakers are sitting on $3.8 million unsold units. This is over $100 billion worth of product taking up space.

Bob Shuman owns a dealership in Walled Lake, MI. He commented:

“Inventory is not just an interest expense, it is advertising. If a guy looks in the paper and sees I have 20 [minivans] and another guy has 60, where’s he going to go?

With the traditional dealership model, there is an expectation of advertising, incentives, and haggling. None if this is true for Tesla’s direct sales approach.

U.K. consultant, Ben Waller, said about 6% of U.S. cars are “made-to-order”. However, in Europe, around 50% of buyers place orders and wait for delivery.

It seems doubtful that the U.S. will change the system after all of these years. Converting the U.S. auto industry to primarily made-to-order, faces many obstacles. Autonews reported:

“In 2000, Ford Motor Co. and General Motors raced to see if they could allow consumers to order cars online and have them delivered to their doors within a week. Former GM purchasing boss Harold Kutner was assigned by GM to see what the automaker would have to change to make such a dream possible. His answer? “Everything” had to change: purchasing, manufacturing, assembly, logistics, ordering, dealer operations, inventory control — everything from top to bottom and back again. It didn’t.”

This is not to say that there aren’t or won’t be companies diving in. Mini currently sells about half of its cars in the U.S. as made-to-order, and pulls off delivery in 4-8 weeks. Mariella Kapsaskis, Mini spokeswoman said:

“(Mini focuses) on making it easy for customers to specify their own vehicle, offering most options a la carte to maximize customer freedom in building a car with exactly what they want or need.”

Tesla’s unmatched success with the Model 3 is the ultimate proof in the power of the internet and the potential success of made-to-order vehicles and the direct sales model. Now, it’s just a waiting game to see how it inevitably all pans out.

Source: Autonews

Tags: , , ,

44 responses to "Tesla Model 3 Proves That U.S. Buyers Want Made-To-Order Cars"

  1. SparkEV says:

    sitting on $3.8 million unsold units? I think there’s extra $

    1. RAV4 EV says:

      Yes the cost for handling $3.8 million has to be significant.

  2. jelloslug says:

    Bottom line: why put forth the effort when there is nothing to really gain from it.

    1. Rick Danger says:

      Because the title to this article.

      1. jelloslug says:

        read the article and you will see what the other car companies have to say about it.

        1. Eric says:

          And the other companies know better than Tesla, because what they’ve always done will always work in the future, right?

          I wouldn’t be so sure. Maybe Americans have less patience than Europeans when it comes to having cars delivered. But Mini has proven there is a market in the US for custom order cars. Americans in general aren’t used to it, yet. But who knows what’ll happen if word gets around that the process is less painful than getting ripped off at a dealer and ending up with a car happened to be in stock, instead of paying a fair price for exactly the car you want.

  3. pjwood1 says:

    “made-to-order” isn’t much good, if you want more than one drive mode in your Tesla. I don’t always want the full straight-jacket.

  4. Loboc says:

    Made to order is inherently slower than firing up a build machine. Once GM turns on a line, they’re shooting out cars at 100x what Tesla is doing. Basically all they can do is slip-stream a custom order every 100 or so builds.

    Eventually, this will all be more custom as parts can be printed JIT.

    1. JH says:

      The made to order model works well here in europe. As the article says. And the european market is equal in size as the american.

    2. Eric says:

      At the moment, made to order takes a bit longer than buying a car off the shelf. That’s only bad for consumers who value instant gratification above all else. When more consumers learn there can be more value in waiting a few weeks and getting exactly what they want, things may quickly change.

  5. Speculawyer says:

    The dealership model is falling apart. The internet, Tesla stores, and reduced maintenance/repair requirements of EVs just make the dealership an unnecessary middleman that just reduces efficiency.

    What does a dealer provide to me? Nothing but annoyance as far as I can tell.

    1. jelloslug says:

      I like my i3 but the dealer I have to use makes me hate it sometimes. I had something else break on it this weekend and I think I will just live with it until I turn it back in rather than taking it in to have it fixed.

    2. ffbj says:

      The drawbacks to the stealership model are many. Unsold inventory sitting on the lot, unpopular vehicles sitting out waiting to get hit with a hailstorm.
      A public which despises dealerships, with good reason.

      It’s just an archaic artifact from a bygone era prior to the internet, that has outlived its usefulness. It is rife with corruption and scams that damage the consumer and simply adds cost, not value, to the purchase.

      1. Mike says:

        I agree. Most people have a negative view of dealerships and their salesmen. It’s well known that car salesmen use manipulation and deception to sell, and people are tired of feeling like they have been shafted. Once car buyers realize there’s a different model, I think the dealership model will collapse.

  6. Rob says:

    Not sure that “Made to Order” has anything to do with Tesla’s success. To me it has more to do with great looking cars, pure electric, 200+ mile range and supercharger network. Tesla may find itself creating three model package choices just to simply the build process.

    Still happy to be able to order online and happy to avoid the typical ICE order experience.

    1. Speculawyer says:

      That is all true. But cutting out the annoying dealership experience and lowering the price by cutting out the middleman helps.

    2. Bill Howland says:

      Agreed. I think 300,000 reservations more basically means there is PENT UP DEMAND for a decent, 200 mile range BEV in the $30-40000 range. A model S is just too pricey for most people.

      This also tends to indicate the BOLT should also do much BETTER than expected, for 2 big reasons.

      1). It also goes over 200 miles before worrying about recharging the battery.

      2). Depending on how you look at it, the car is practically ‘huge’. It is classified as a Mid-Size Wagon, and therefore will essentially be the BIGGEST PHEV or BEV that GM has ever made.. Even the CT6 phev is doubtful to carry more than the BOLT.

      If both the ‘3’ and ‘bolt’ are very successful in the marketplace, then this will be a very big wakeupcall for the rest of the car makers.

      Carlos Ghosn for one, is certainly a Serious Person – no one would claim that he makes many silly decisions. I keep remembering the horrid expression he had on his face after closely looking at the BOLT.

      It was as if he was saying, ‘We are finished if we don’t have a competitive product to this very soon’.

  7. Texas FFE says:

    I’ve had a bad experience with factory order, the car took 11 weeks and then was a lemon. I might be willing to order and wait 4 to 6 weeks for a car if I could control the price. Anyone that orders a Model 3 right is probably going to have to wait three years for delivery unless they order the top of line model.

    1. Eric says:

      I’ve had nothing but great experiences with factory orders. Four so far. My current car did take nine months to arrive, due to a little storm in Japan in 2011. But I’m still quite happy with it. It’ll probably be replaced by a Model 3.

  8. Pushmi-Pullyu says:

    “Tesla Model 3 Proves That U.S. Buyers Want Made-To-Order Cars”

    It proves no such thing. This is clearly a case of jumping to a conclusion. Perhaps what it proves is that there is a pent-up demand for a compelling, stylish 200+ mile BEV.

    Online ordering and sales, and a lack of haggling, make it easier and less time-consuming to buy a car. But that doesn’t necessarily mean that’s what most car buyers want. I suspect most car buyers don’t want to have to wait for weeks (or in the case of the Model ≡, wait years) to get the car they want.

    1. RexxSee says:

      +1
      We order teslas because we have all the confidence that Musk will deliver a better car.
      Else I always want to test-drive a car before buying.

    2. John says:

      I think both are correct. Not only are people excited at the opportunity to order *exactly* what they want, but they are excited receive it, and live with it in an entirely different way. People are finally starting to wake up and realize that every aspect of current vehicle ownership is designed to separate them from their money and remove control.

    3. Rich says:

      +1 I agree, this was pent-up demand.

  9. Nelson says:

    I think people will feel more confident in a company that makes and services one type of power train than one that has to deal with multiple ones. Which fast food had that “We do one thing, like no one else can do” jingle?

    NPNS! SBF!
    Volt#671

  10. Anon says:

    The significant thing that Model 3 really proves; is that every Automotive Exec that has claimed “No one wants Electric Cars”– was absolutely full of SH**.

    1. John says:

      + infinity?

  11. philip d says:

    “Inventory is not just an interest expense, it is advertising. If a guy looks in the paper and sees I have 20 [minivans] and another guy has 60, where’s he going to go?”

    Trick question. The guy doesn’t want a minivan and is going to neither. The guy wants a Model 3.

    1. Eric says:

      😀

  12. Fool Cells says:

    that is not true. US car buyers would prefer to haggle in the superior car dealer model. The model, which is forced into action via law so no one has a choice of how they buy cars.

  13. Orygun EV driver says:

    “Tesla Model 3 Proves That U.S. Buyers Want Made-To-Order Cars” should read read Tesla Model 3 Proves That U.S. Buyers Want $35K 215 mile range EV and will put up money and wait to get one”
    Hopefully the $35K version does not suffer the same demise as the $50K Model S. Since Tesla will build only the higher spec Model 3’s at first, those waiting are likely to “up-order” in order to get delivery. So the first 100K(?) will be $40K+ versions and Tesla might proclaim “there is no demand for the base Model 3 so we will not offer it as an option and will not produce it”. Pretty much what happened to the 40kWh S.

    1. Pushmi-Pullyu says:

      Orygun EV driver said:

      ” ‘Tesla Model 3 Proves That U.S. Buyers Want Made-To-Order Cars’ should read read Tesla Model 3 Proves That U.S. Buyers Want $35K 215 mile range EV and will put up money and wait to get one”

      Well said, sir! You phrased that much better than I did.

    2. Kacey Green says:

      They built a few 40s to honor their commitments instead of cancelling them

    3. Priusmaniac says:

      It is good to precise that since I would have no problem taking an “on inventory” Model 3 if there was one happening to be standing on a parking lot somewhere right now. The car is the jewel, not the fact that it would be standing available or only made to order.

  14. Tilehead says:

    Deposits for cars (including made-to-order) in California are always refundable. If a customer orders something weird with an oddball color, they have the right to refuse acceptance and get their deposit back.

    Therefore, dealers in California have no interest in made-to-order cars.

  15. Three Electrics says:

    The MINI Cooper has been made to order for years now. It’s not a unique concept.

  16. Forever Green says:

    I am very happy about what I’m seeing coming from Tesla. Specifically with the model 3 pre-production orders. I think we still have a long way to go, but this baby is off of life support. I would like to thank all the automakers that have contributed to Electric Mobility, even Toyota.

    1. kubel says:

      Tesla only has enough cash to last them another 3 quarters, maybe 4 with the unexpected reservations.

      1. Pushmi-Pullyu says:

        Good, then! I would certainly hope Tesla isn’t sitting on a huge pile of cash, when they should be investing as much as possible in growing the company as fast as they can.

        Now, certainly Tesla doesn’t want to run short of cash; a cash-flow shortage restricts a company’s options, which can lead to a very negative feedback loop of spiraling costs and eventual bankruptcy.

        But Tesla should keep only enough liquid funds on hand to ensure they don’t get into a bind. Beyond that, there doesn’t seem to be any good reason to let cash just sit around; it should be used for capital investment in growing the company, or for paying off part of the company’s debt.

  17. Steven says:

    I’m guessing I’m over the average age among the readership here…

    I remember even as late as the ’70’s, the Big Three had pages and pages of options that car could be equipped with. Choose between two or three engines, choose between three transmissions, interior trim levels. That’s how some cars were considered more desirable than others even in the same model year.

    Then in the name of speed of delivery, and cost reduction, items got packaged into “option groups”. I remember buying a car some years back, being told that the only way I could get ABS, was with a sun roof (something I didn’t want).

    So yeah, if I’m going to plunk down a fat stack, I’m willing to wait to get exactly the car I want.

  18. Stupid line of thought here. People want an attractive inexpensive all-electric drive car with a great charging infrastructure from a reliable manufacturer. How I order up the features / options is inconsequential.

  19. PVH says:

    Of course, in Europe we almost have nothing else than “made to order cars”. Waiting time is usually 3 to 6 months. It is just pieces of metal and plastic put together after all, I can wait 3 months for that. Should I not be able my close family should be rightfully concerned of place that objects take in my life.

  20. Chris says:

    LOL “Want Made to Order cars”…LOL – what was the other option for the Model III? I’m sure if you told those same folks “We have a pre-built spec car sitting here that has 90% of the options you want or you can wait months for your exact combo?” the average U.S. Buyer goes for the former. yes, a FEW people will spec out EXACTLY what they want and wait, but who doesn’t love immediate gratification!

    Indeed, a recent Car and Driver article pointed out just how many people do almost no research when buying a car and a huge percentage never even test drive the car they buy…they just do the old “I bought and Accord last time…I will just buy the new Accord this time”.

  21. Bret says:

    The way Tesla accepts custom online orders for cars reminds me a lot of the way Dell revolutionized the PC business. Before Dell, you had to buy a PC from a retailer. 🙂