Ford Moving toward Build-to-Order, Away from Packed Dealer Lots

·3 min read
Photo credit: Justin Sullivan - Getty Images
Photo credit: Justin Sullivan - Getty Images
  • The pandemic and the resulting chip shortage have changed how Americans buy cars, and Ford thinks that a build-to-order process is the right way to go moving forward.

  • To help sell cars online, Ford recently introduced Ford Express Buy for the Mustang Mach-E and Ford Blue Advantage for used cars and other digital options.

  • CEO Jim Farley, quoted by Reuters, said he knows Ford is wasting money on incentives, which is less of a problem when the customer says up front, "This is the car I want."

Ordering the exact vehicle—color, trim level, accessories, everything—that you want is how many Europeans have been buying their cars for ages. But the U.S. has been more committed to the model where shoppers go to the dealership and then drive home in one of the cars off the lot. The pandemic has changed how Americans interact with their local dealership. People are now choosing to do more communication online, and they're expressing less insistence on going out to take a test drive.

Ford noticed, and now the company wants to shift more future buyers to the vehicle ordering process, Ford CEO Jim Farley said on a conference call this week with reporters to discuss the company's second-quarter results. Getting more buyers to order a specific vehicle online can also help Ford's bottom line.

"We are really committed to going to an order-based system and keeping inventories at 50 to 60 days' supply," he said. "I know we are wasting money on incentives."

It's not just the direct impact of COVID that has caused the shift in customer behavior. The chip shortage that has been affecting dealership vehicle supply since earlier this year is another big reason Ford thinks it can do better when more customers order their vehicles. The chip shortage has forced people to wait for the vehicle they wanted, since low inventory meant a wide range of choices were not always available on the lot to drive home.

Ford recently introduced Ford Express Buy, an online-only way to purchase a Ford vehicle in the U.S. For now, the only model you can purchase this way is the Mustang Mach-E, but Ford's president of the Americas and International Markets Group, Kumar Galhotra, told Automotive News last month that the system will expand to other models at some point.

"It's a really exciting way for us to sell vehicles in partnership with our dealers," Galhotra said. "You can start building your vehicle, pricing it, put it in the cart, and you can go all the way to make a transaction. Ford Credit can approve the customer's credit in seconds, and you can make the payment and the dealer can deliver the car to your home."

Using Ford Express Buy is optional for Ford dealers. Ford also has Ford Blue Advantage to sell certified used Ford vehicles online and, in Mexico, there's the Ford Digital Store, which lets people buy a new vehicle 100 percent online.

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