During the lockdowns in 2020, brick and mortar car dealerships were not deemed “essential services” and many had to furlough workers, shut their doors, and halt orders from factories. Little did we realize that demand for cars would quickly rebound, buoyed by federal stimulus checks and lower public transit use. The auto industry began to see inefficiencies in the traditional inventory model: dealers have to pay for physical space to store cars that may or may not be purchased, pay to keep cars in inventory and showroom ready, and pay to have specific colors or trims shipped from other locations. Anticipating customer demand is a big part of the business, and costly to get wrong.
Ford recently announced an industry-shaking move to an online, fixed price, direct model for its electric vehicles, citing high distribution and advertising prices. On the manufacturing side, Ford CEO Jim Farley explains, "You cannot imagine ... how much money we waste by not -- by guessing what our launch mix is for a new product." Parts such as semiconductors, which are heavily used in electric cars, are in tight supply, and manufacturers want to use them only for cars that people will buy.
The overhead of the traditional model is even more pronounced when it comes to new technology, such as EVs. Dealerships feel like they are taking a risk to bring them onto their lots, and manufacturers didn’t want to overproduce cars that wouldn’t get bought. The pre-order model solves this problem for both parties. Manufacturers can make cars that people want, and dealerships get easy sales by delivering them. Pre-orders also mean up-front insight into market appetite, and resource allocation to vehicles that will sell. Plus, Tesla had been using a pre-order model for almost a decade, with overwhelming success.
Part I: EV Pre-Order Numbers Leaderboard
Since the pre-order model has been adopted by the growing electric vehicle market, Recurrent has started tracking publicized pre-order numbers, plus the delivery estimate for each car. To get this data, we comb the internet, including forums, EV industry journalism, and press releases. Drop us a line if you've seen an update or have intel.
Part II: Phantom Orders by EV Model
This spring, we surveyed over 200 EV shoppers (and counting) in partnership with AAA Washington to ask two simple questions: what EVs have you preordered, and which do you intend to actually buy? How likely it is that those big reservation numbers turn into actual sales depends a lot on the model.
The chart below shows what percentage of reservation holders intend to take delivery of their vehicle, for the most highly ordered models.
Some surprising things drop out of this - while many EV enthusiasts have made reservations, some of them are not serious shoppers. There are two clear outliers:
- Tesla cars: Model S, Model X, Model Y, and Model 3, which have 100% order fulfillment, and
- Chevrolet Silverado, which has under 20% intended fulfillment
In the case of Tesla, there is a non-refundable order fee that may weed out some impulsive reservations, as well as the knowledge that the market is hot enough to resell your order before you even take delivery.
For the Silverado, those who have put down reservations may feel like the delivery timeline (2024) is too far away to commit to, or they may worry the price will be much higher than quoted (as happened with Rivian pre-orders this year).
These two outliers point to larger themes we suspect are driving these reservation fulfillment numbers.
- Uncertainty on delivery time - or delivery at all - may cause some shoppers to modulate their enthusiasm for certain vehicles. Of course, the Tesla Cybertruck, with its seemingly infinite production delays, comes to mind here.
- Refundable reservations mean that customers can express interest in many cars and make the decision when they see when, and what, they can actually drive off in.
- With all the buzz around electric vehicles, manufacturers may be incentivized to make reservations easy for shoppers in order to pump up their numbers, even if these reservations don’t all turn into sales.
This last point brings us back to the very concept of car pre-orders. Pre-orders mean up-front cash before the customer actually has anything to show. There are hundreds of thousands of people giving $100 to car companies only to pay dealerships another $50,000 after a year (or more!) of waiting. While pre-orders can be great, it’s also worth considering Marques Brownlee’s healthy dose of skepticism.
So what does this all mean if you’re shopping for one of these reservation-system cars? Know that even if you don’t get your pre-order in, there will likely be vehicles available - although you may have to compromise on color. Also, for many reservation systems, the final price is up to the dealership upon delivery.
Have a pre-order (or more than one)? Take our survey and we’ll update our numbers quarterly.
Part III: The Reservation Overlap Landscape
Amongst EV enthusiasts, we’ve heard of many people who reserve multiple upcoming vehicles because they are all so exciting. Anecdotally, we had evidence of overlapping reservations for Rivian, Tesla Cybertruck, and the Ford F-150, and between Volkswagen ID.4/Hyundai Ioniq 5. But, we’re scientists, and we need data to see how prevalent these overlaps are.
Without further ado, the reservation landscape as of June 2022:
Some interesting stories emerge from the data, and we will be sure to update them as we get more data points and as some of these vehicles begin to hit the road:
- Refundable reservation deposits make it easier to keep options open. One shopper has pre-ordered the GMC Hummer EV, a BMW iX, the Chevrolet Silverado, the Nissan Ariya, and the VW ID.4, but only plans to take delivery of the BMW. How common is this sort of reservation frenzy? It depends on the vehicle.
- More electric car models allow shoppers to be selective. While pre-orders for electric trucks tend to overlap across multiple new offerings, there are more standalone reservations for cars like the Subaru Solterra, Kia EV6, and Hyundai Ioniq 5. These shoppers want the car they ordered and are reserving their place in line to buy it.
- Truck buyers are hedging their bets with multiple reservations. There’s clearly a lot of over-ordering happening here as no one is sure who is going to actually deliver these yet-untested trucks. About 89% of Tesla Cybertruck reservations overlap with another truck pre-order, and 100% of Ford F-150 and Chevrolet Silverado reservations also pre-ordered another vehicle on this list.
- Tesla brand loyalty runs deep. Recurrent found that many families have gone all-in on Tesla. Around 50% of those who have reserved both a Telsa Cyber Truck and a Tesla car model plan to redeem both.
- Tesla reservations do not overlap with other brands. If you’ve reserved a Ford F-150, Rivian, or Chevy Silverado, chances are good that you may also have reserved a Tesla Cybertruck. But, if you’re interested in any of the new, non-truck options on this list, there is virtually no overlap with the Tesla brand. There is a clear chasm between non-Tesla cars and Tesla reservations.
Do these observations line up with your experience? We invite you to take our survey and let you know what the pre-order landscape looks like in your corner of the world!