U.S., Canadian Build-to-Order Vehicle Purchases Growing, Experts Say

OTTAWA – The number of build-to-order (BTO) auto consumers pre-ordering vehicles in North America direct from OEMs has been growing, but not as quickly as automakers predicted during the COVID-19 pandemic.

Survey data released by Cox Automotive in February says 267 out of 1,932 U.S. consumers had pre-ordered vehicles in the previous 12 months, with 221 buying from legacy OEMs such as Ford and Toyota, while 46 bought from start-ups such as Tesla and Rivian. 

But that was just 14% of new buyers, compared to 17% in 2022, when tight inventories drove an increase from 9% in 2021, says Cox data. 

Sean Tucker, senior editor for Cox’s Autotrader and Kelley Blue Book, tells WardsAuto: “We'll see more ‘build-to-order’ over time, but I think it’s taking a lot longer than most people thought, especially during the pandemic.” He says one key reason is that dealers know local markets and help sell autos – Wisconsin dealers selling plenty of tow packages, for example.

Moreover, the Cox survey shows customers generally are not happier being offered a wide range of color and accessory options through build-to-order web functionality. Tucker says 73% of both BTO and dealer buyers were happy with their purchase. “People just want a car, and they don’t care how it’s served up to them,” he says. 

That said, in Canada, analysts DesRosiers Automotive Consultants (DAC) says build-to-order light-vehicle purchases expanded during the vehicle shortages of 2021-2023 and may persist; dealers predict they will comprise 45.3% of Canadian auto sales in 2030. DesRosiers says Canadian BTO had been “championed by some new entrants such as Tesla” and expanded “largely by necessity, as dealer inventories hit record lows.”

Canadian motorists now accept delivery delays to get their preferred auto, says the Ontario-based consultancy, with 55.7% polled accepting waits exceeding one month, and 22.6% more than three months, even with inventories now back to standard levels. Andrew King, DAC managing partner, says: “Assuming supply chains are working efficiently, and vehicles can be delivered in a timely manner, extensive on-the-ground inventory does not appear to be a prerequisite for success...” 

While some manufacturers do sell cars directly to motorists, such as Tesla, whose 2023 annual report argued its website and company-owned stores “enables us to better control costs of inventory, manage warranty service and pricing (and) educate consumers about electric vehicles,” the days when Tesla only made a car if it was pre-ordered are gone, says Tucker: “Now they’ve developed an oversupply like everybody else, so if you place an order they find whether they have the matching thing in their inventory and they weren’t doing that five to 10 years ago.” https://ir.tesla.com/_flysystem/s3/sec/000162828024002390/tsla-20231231-gen.pdf 

Tesla’s online purchasing system does offer consumers many options: paint color, wheels, interior decoration, connectors, accessories such as roof racks and all-weather interior liners and more. 

Volvo Cars’ battery-electric vehicles, such as the new C40 Recharge CUV, can be ordered online and picked up at a dealership, says Cox’s Kelley Blue Book reference. https://www.kbb.com/car-advice/ordering-car-from-factory/ It offers purchasers varying models affecting powertrain and accessories such as tow bar hitches, bike racks, mud flaps and more, although Volvo dealers still liaise over sales and delivery. 

U.S.-based Rivian offers an online shop selling models of its R1T pickup, saying many are “ready for delivery in 14 days or less.” Another U.S. startup, Lucid Motors, offers options for color, decoration and extras such as enhanced driver-assistance systems, heated system options and immersive sound audio. An in-house delivery advisor coordinates sales and distribution.  

For manufacturers to deliver on these BTO promises, production and supply must be efficient, stresses a May paper by Thoughtworks, a U.S.-based technology consultancy. That means adjusting production processes, including managing vehicle inventory for fully built, partially built and (parts for) non-yet built models. And it requires optimizing supply chains, with predictable critical component availability limiting delivery lead times: “This is especially important for mass models where customers may not have the patience to wait,” it says. https://www.thoughtworks.com/en-ca/insights/blog/customer-experience/the-inventory-tightrope-in-automotive-industry-build-to-stock-vs-build-to-order 

David Adams, CEO, Global Automakers of Canada, says direct sales and customization were fueled by the COVID-19 pandemic: “Nobody had any vehicles and manufacturers found out that having no inventory (but) lots of demand is not a bad situation. It wasn’t so bad for dealers either, from a financing and floorplan basis.” Manufacturers don’t want “huge incentives on vehicles to move them.” Instead, increased customization may enable automakers to charge more for extra accessories. 

Adams expects BTO will expand to focus more on higher-end luxury vehicles. Sales of pickup trucks, especially those used commercially, benefit significantly from extra customization through BTO, he notes. Also, BEVs are attractive options for direct purchases, given dealer networks for these models are still being established. “We’re seeing a lot of experimentation,” Tucker says, highlighting how Hyundai and Amazon are developing a partnership where the Korean manufacturer sells vehicles on the online retailer's website.