Automakers To Test Web-Direct Sales in Canada

U.S. automakers have hit a number of regulatory roadblocks to selling cars directly over the Internet, but Ford Motor Company and Toyota are crossing the border to implement a test program that will enable shoppers in three Canadian regions to purchase cars online.

Ford is offering only three of its most popular vehicles online: Taurus, Windstar and Focus. Both the Ford and Toyota sites provide comparison shopping features, information on trade-in options, and financing applications, as well as the opportunity to place orders for cars.

If the Canadian sites are successful and generate adequate sales figures, chances are the companies will expand their efforts throughout Canada and elsewhere. Whether they will be able to apply the same model to the United States is questionable because regulations and tax laws vary from state to state.

Dealing with Dealers

In Canada, the online test programs are being conducted in cooperation with offline auto dealers. Ultimately, each order placed on the Web will be processed through an existing land-based dealership.

Working with the dealers is likely to help the manufacturers eliminate one of the major obstacles in direct online auto sales. Direct online sales to consumers have strained U.S. manufacturer-dealer relationships significantly.

A Better Idea

Having faced difficulties in early efforts to sell directly to consumers in the United States, Ford claims its Canadian test program is designed to sell directly from manufacturer to consumer, even though final transactions will go through dealerships.

Toyota is testing its program on both sides of the border. In the United States, Toyota has an online sales program in Seattle, Washington with 19 dealer participants.

What is appealing to a prospective car buyer is the option of buying a vehicle without having to haggle over price with a saleperson. In the Canadian test program, the buyer will not even have to visit a dealership because the car will be delivered directly to the buyer’s home or other specified location.

Predicted Boom

Some analysts think that the challenges facing automakers selling cars online are merely “growing pains,” and predict that mass online auto sales are right around the corner.

According to Jupiter Communications, online sales of new cars will explode over the next few years. In 1999, direct Internet sales of cars accounted for 0.1 percent of new car shipments. By 2004, that number will swell to 8 percent of new car shipments, the research firm predicts.

“We’re moving away from interactions with dealers,” said Jupiter analyst Rob Leathern. “People buying cars online are still going to need hand-holding now, but we see a strong market opportunity for third party sites to enable consumers to buy cars online without a salesman.”

While Toyota claims it is not necessarily moving its entire business online, the Canadian test figures may persuade the company otherwise. In the first month of the sales test in Canada, activity on the Toyota Web site increased 40 percent.