PARIS, July 12 (Reuters) – For Emilie Malherb, choosing the color of her brand new Renault ( RENA.PA ) Arkana SUV was easy because only three were available: black, pearl white and grey.
She and her husband quickly settled on the gray because the most important thing was that the car be delivered quickly.
“We heard on TV that we could face delays of six to eight months to get a new car,” said Malherbe, 41, a resident of the Calvados region in northern France. “I smiled when they told me 30 days. But I got it in 15 days, which was great.”
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Faced with a global shortage of semiconductor chips and other supply chain disruptions, Europe’s automakers are offering cut car options so customers can get a new car before the end of the summer holiday season.
This is a major reversal for an industry that has bet heavily on customization, which complicates production processes and erodes profits.
Instead, automakers are following Tesla Inc, whose principled approach to automotive options has helped boost profits.
If they want a fast car, consumers don’t have much choice.
Renault’s ‘Fast track’ offer for the Arkana, which is already being delivered in France, guarantees a new car in a maximum of 30 days – compared to an average wait of five months.
The cars are only available in three colors, compared to the usual full range of six. Only one trim level (RS Line) is available and there’s only one engine choice. Rush orders account for half of Arkana new car registrations in France in June.
If any buyer requests additional options, delivery is not guaranteed, according to Renault.
“FEAR OF ELIMINATING SALES”
A source close to Renault told Reuters that the French carmaker expects these simplified offers to increase across the industry as supply chain problems do not end soon.
“It sends the message that reducing commercial and technical diversity is compatible with good business,” the source said.
For years, vintage car makers have taken the approach that the ability to customize color, trim and accessories – and remotely monitor the car’s progress as it’s being built – is critical to sales performance.
But according to a 2020 analysis by auto consultant JD Power, across the entire auto industry, 98 percent of model combinations sold fewer than 50 units each and cumulatively accounted for just 25 percent of total sales.
The remaining 2% of combinations account for the remaining three-quarters of sales.
This is a far cry from Henry Ford’s mantra for his Model T that customers could have “any color as long as it’s black” so that the production line could focus on efficiency and quality. Ford founded Ford Motor Co (FN) in 1903.
PARADOX OF INDUSTRY
Some major automakers periodically talk about the need to go back to fewer options, but they’re finding it hard to follow through.
In the U.S. market, for example, large pickup trucks are available in 70,000 combinations, said JD Power analyst Doug Betts.
“The industry has been up that hill many times,” Betts said. “It’s just never been clear how to solve the problem.”
“The fear is that if you don’t have data on which versions to remove, you can remove sales,” he added.
Supply problems and the need to simplify industrial processes to meet the huge costs of electrification may have changed this.
“The auto industry is experiencing a real paradox: on the one hand, it wants to produce on demand instead of ‘pushing metal,’ but reduced product variety makes it easier for customers to find the models they want in stock,” said S&P Global Mobility Analyst Dennis Shemul.
“Reducing diversity benefits everyone,” he added. “And everyone will follow them, even the Germans.
Faced with component shortages, Volkswagen AG ( VOWG_p.DE ) in February reduced options for its electric ID3, already available in Europe in one version, to shorten delivery times.
“The priority of the Volkswagen brand is to really provide an offer that can be delivered to customers as soon as possible despite the limitations related to semiconductor shortages,” VW said in a statement.
The pared-down ‘Up & Go’ offering from Renault’s low-cost Dacia brand focuses on engines and equipment lines rather than reducing color options.
“By directing customers to two engines and one finish, there is no longer confusion of choice… and thanks to this, from an industrial point of view, it is much easier to program, to plan,” said Dacia’s logistics and distribution director Dimitri Manusis.
The program shortens delivery times by 40 days. Dacia says the Up & Go, which is available in just 14 combinations, accounts for 30% of Duster SUV sales in France, while 400 combinations account for the remaining 70%. Duster is Dacia’s second best selling car.
“If we reduce product variety, we make a lot of things more fluid,” Manusis said.
Dacia will roll out “Up & Go” across its range and expand to Belgium, Morocco and Portugal by the end of the year, followed by the UK.
Renault’s “Ready to Go” is also good for the automaker’s margins, as the streamlined “fast track” Arkana starts at 38,630 euros ($39,348), a similar price to the model’s top-of-the-line version, the RS Line.
For customers like Emilie Malherbe, who originally wanted a fully loaded RS Line, going for a simpler option was the only way to get a car in time for summer.
More simplification is coming. Stellantis has reduced the base version of its new Peugeot 408 and will offer only two trim levels.
“The new 408 focuses on the most sought-after trim levels,” said Peugeot product director Jérôme Micheron. “This will simplify the customer journey.”
“It’s easier and faster to configure your car on our website when there aren’t too many options,” he added.
($1 = 0.9817 euros)
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Reporting by Gilles Guillaume in Paris and Joseph White in Detroit Writing by Nick Carey Editing by Ben Klyman and Matthew Lewis
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