Nissan Ariya EV sold through reservations

In an industry grappling with vehicle shortages and changing consumer attitudes about strolling through dealership lots, Nissan is ditching convention in going to market with its newest model — the electric Ariya crossover.

Rather than have dealers order the Ariya at launch, Nissan will take reservations directly from potential customers.

It's a distribution approach gaining momentum for yet another industry trend: Automakers are struggling to get their retailers enthusiastic about stocking and selling electric vehicles.

Nissan will announce the start of Ariya reservations this week. The Rogue-sized model will be Nissan's entry into the bustling compact-EV-crossover segment when it goes on sale in the U.S. in the second half of next year.

Early interest has been strong. The Ariya has garnered about 135,000 hand raises from potential customers, according to an update shared with Nissan retailers this month.

Nissan dealer Tyler Slade said he's excited to see the brand have a product for which people are willing to make a reservation.

"We've always been about pushing product on the market, rather than having customer demand dictate production," said Slade, operating partner at Tim Dahle Nissan Southtowne in suburban Salt Lake City.

Aditya Jairaj, Nissan's director of U.S. electric vehicle marketing and sales strategy, described the reservation program as a way to connect with the product's most enthusiastic customers.

"It's a two-way dialogue," Jairaj said. "Customers are extremely keen to understand how the Ariya can fit into their lives. We want to know about them, what their interests are, what they're looking for."

The information Nissan collects from reservation holders serves as a "key input" into decisions around product development and production planning, he said.

Sam Abuelsamid, principal analyst at Guidehouse Insights, said that through refundable deposits of a few hundred dollars, reservations are an accurate gauge of the "intent to buy."

That helps automakers forecast production volumes and figure out to which markets to allocate the vehicles.

"Especially for a global vehicle like Ariya, Nissan's going to have some supply constraints," Abuelsamid said. "If they know that they've got 50,000 or 100,000 people in the U.S. willing to put down a deposit, they're more likely to allocate more of the available products to this particular region."

But building demand through a reservation system can have a downside.

Reservation-holder enthusiasm — and patience — can quickly fizzle if production schedules slip and deliveries get delayed. The industrywide semiconductor shortage has already pushed the Ariya's global market launch from mid-2021 to next year.

If reservation holders face long delays in getting their vehicles, "that can cause frustration and cause them to maybe go look elsewhere," Abuelsamid said.

Slade pointed to Ford's experience with its Bronco reservation program. The automaker this year temporarily halted accepting reservations for the crossover following a surge in demand and production issues, according to a report.

Ford "took way too many reservations," Slade said. "People have been waiting way too long and they can't get what they ordered."

Jairaj declined to say how many reservations Nissan expects it will receive for the Ariya or when they would be fulfilled.

"It's important that we consistently communicate with customers and keep them posted on what the current condition is," he said.

While manufacturers and early adopters warm to the reservation model, some dealers are cool to the idea.

It's not how customers traditionally buy cars, cautioned a Nissan dealer who asked not to be identified.

"The customer gets confused by it, and we get confused by it," the dealer said. "They haven't even seen this car in person, they don't know what it drives like; they don't know how it handles; they don't know what it smells like."

Some see the reservation model as an end-run around a central tenet of the franchised dealer system — customer control.

"It is the dealer's job to control the retail relationship," Slade said. "I would say the reservation system gives the factory more control of the customer relationship."

Morningstar automotive analyst David Whiston goes even further, noting the reservation model takes the dealer out of the sales process "just about completely."

"To me, it just seems like the OEMs are nearing the line of violating their franchise agreements," Whiston said. "I am surprised I haven't seen more dealers screaming bloody murder."

The one-price reservation model also threatens to chip away at dealers' ability to adjust vehicle pricing based on supply and demand.

"It's taking away pricing power on a vehicle that has more demand than supply," Slade said. "Capitalism says that market conditions should prevail."

Even worse, the reservation system allows early adopters to compete with the brand's retailers.

"Customers with early product delivery are able to buy and then immediately sell their car for several thousand dollars more," Slade said.

To mitigate that potential, Nissan will cap the number of reservations, Slade said.

The growing prevalence of reservation programs could be a result of automakers' frustration with their retailers' inability, or unwillingness, to sell electric vehicles.

Some dealers have pushed back against EVs because they view them as being less profitable because of reduced service business.

"One of the biggest complaints you get from people that have been interested in buying an EV," Abuelsamid said, "is they go into a dealership and the salesperson tries to sell them something else instead."

Indeed. A recent J.D. Power study revealed that EV buyers were less satisfied with their sales experience than shoppers of internal combustion vehicles. One reason for this is dealership personnel's knowledge and expertise with EVs, the study noted.