Model E Becomes 'Built-To-Order' in Online Auto Merger

A new car company offering customized automobiles over the Internet has been formed through the merger of online car sales company Model E and Flint, Inc. a start-up created by CarsDirect.com co-founder Scott Painter.

The new venture, called Build-To-Order or BTOauto.com, said that it will be led by the former chief executive officer of Model E, William Santana Li, and will include executives from such automakers as GM, Ford and Toyota. Painter will serve as the company's chairman.

"It's about the right time in the industry for this kind of thing to be happening," Forrester senior analyst Dan Garretson told the E-Commerce Times. "I think you'll see a lot more of these kinds of initiatives in the future."

Losing The Lease

Model E offered customers the opportunity to lease high-end vehicles over the Internet, including cars manufactured by Model E as well as customized "enhanced" vehicles made by traditional manufacturers.

According to published reports, the new venture will discontinue Model E's "subscription" plan, which provided customers with a combined service covering their automobile lease, insurance and maintenance for a flat fee.

Both the build-to-order and leasing services "were very difficult things to do, because they're relatively separate businesses," according to Garretson.

"I think it's a good thing they're choosing to focus on one side or the other," Garretson said.

Ford Case Settled

The formation of the new company may have also helped Model E come to terms with a lawsuit filed by the Ford Motor Company (NYSE: F), which argued that the name "Model E" too closely resembled the trademark name of Ford's famous Model T car.

Under the terms of a settlement agreement announced Wednesday, Model E agreed to transfer its rights in the Model E trademark and domain names to Ford.

Different Challenges

The online auto industry has been hit by a wave of consolidation in recent months, including the merger of CarsDirect.com and Greenlight.com in February, as companies try to figure out an effective method for Internet sales .

A study published last year by the Gartner Group found that while 45 percent of U.S. households used the Web in the car-buying process, 3 percent actually bought cars online.

However, Garretson said that Build-To-Order will not be subject to the same barriers that ultimately undid sites such as iMotors.com.

Driven to Webvolution

"This is fundamentally different," Garretson said. "This is creating a niche brand where they're leveraging manufacturing capabilities to create customized vehicles. These are going to be very specialized cars, targeting specific niches. Other online players were trying to create yet another middleman, but BTO will be able to sell directly because they own the direct distribution channel."

That does not mean the new company will not have challenges of its own to overcome, Garretson cautioned.

"Consumers don't think of purchasing this way," he said. "And [BTO] still has to build a brand. They will have a major challenge competing with large, deep-pocketed OEMs (original equipment manufacturers)."