AOL, AutoNation To Launch Net Venture

America Online, Inc. (NYSE: AOL) and AutoNation, Inc. (NYSE: AN) announced plans Monday to form what the companies claim will be the world’s largest virtual car dealership.

AutoNation, the largest auto dealer in the U.S., and its licensees will be the exclusive retailers of new and used vehicles to AOL members who purchase cars through the co-branded Web site. AOL plans to launch the auto site this fall.

Growing Market

According to J.D. Power and Associates, 55 percent of Americans who buy cars this year will use the Internet, and the number will be closer to 80 percent by 2003.

The AOL venture will compete with such online sellers as CarsDirect.com, Inc., which recently announced an agreement with referral service Autoweb.com, Inc. (Nasdaq: AWEB), and eBay, Inc. (Nasdaq: EBAY), which also sells cars on the Internet.

Dealers’ Changing Role

Car dealers are hoping to keep their piece of the action. Deals like the AOL/AutoNation alliance reflect the view that real-world car dealerships are a necessary component of Internet sales because of the services they provide.

“We think customers are going to buy a car on the Web only from a place that’s backed up from a physical location,” said Michael Morrissey, a spokesman for the National Auto Dealers Association.

About 80 percent of car dealers have Web sites, and about 70 percent of those are interactive to some extent, according to Morrissey.

“We’re working as an association to encourage truly interactive Web sites,” he told the E-Commerce Times. “We think the dealer should be central” to car purchasing, and manufacturers have committed to keeping the relationship.”

Net Incentives

Among the incentives for AOL members who buy vehicles through the AutoNation site are one year of free scheduled service, $100 (US$) off the purchase of a theft-deterrent device, and guaranteed service appointments that can be reserved online. There is also a “no-haggle” pricing policy.

AutoNation also said it bought the AutoVantage online car-buying service from Cendant Corp. for an undisclosed amount of cash and other considerations. The deal includes a three-year licensing agreement covering Cendant’s AutoVantage trademark and logo.

The acquisition of AutoVantage adds more than 900 participating dealerships to the AutoNation network.