Online Auto Sites Revving Up for Battle

Although Internet car sales are not yet breaking any speed barriers, the race between manufacturers and dealers for domination of the marketplace is definitely on.

Roger Penske, a major player in the Detroit auto industry, invested $17 million (US$) in CarsDirect.com last week, instantly creating an alliance between the Web site and 117 automobile dealerships that Penske owns or controls.

Despite both above-board and clandestine efforts by some major manufacturers to undermine online auto sales, recent developments suggest that consumers are warming up to the idea of purchasing their new cars on the Net.

Heavyweight Internet players are responding to the optimism, closing deals and launching ventures aimed at promoting the fledgling industry. When America Online (AOL) and the mammoth dealership group AutoNation, Inc. signed a three-year deal to sell vehicles online, it was a wakeup call for Detroit.

AOL has also renewed a four-year marketing contract with online car buying service Autoweb.com. Together the two companies will launch the America Online Auto Channel.

Autoweb has entered a similar online auto sales agreement with Lycos.

Growth Spurt Ahead

According to Forrester Research, consumers bought a paltry 15,000 new cars and trucks via the Internet last year, while total sales of new vehicles in the United States surpassed 17 million.

By 2003, according to Forrester, online auto sales will swell to 500,000, bringing in estimated revenues of $12.5 billion. International Data Corporation (IDC) projects $27.3 billion in online vehicle sales by 2004.

The projections are good news for online leader AutoNation.com, whose Web site AutoNationDirect.com has already sold more than $1 billion worth of vehicles over the Internet in less than a year.

Even Autoweb.com, whose stock hit an all time low last week, and Autobytel.com, a company that has been trading well below its initial public offering price, can take heart from the optimistic predictions.

Autobytel.com appears to be biding its time, building its business by referring customers to local car dealerships. The company claims to have a network of 5,000 accredited car dealers.

For companies that can afford to weather the painstakingly slow growth of the online auto industry and shrug off the skepticism of the vast majority of consumers, the future appears bright.

The Toughest Audience

Among all potential online automobile buyers, the hardest sell appears to be women.

According to a study by online auto seller DriveOff.com, even though women now make up half of the online shopping population in the United States, only 8.7 percent of women report they are likely to use the Internet in their next vehicle purchase.

The study concluded that while women might use the Internet to research a purchase, they are highly unlikely to complete the deal online.

However, there is a deal breaker that could drive more women to the Net. The DriveOff.com study found that 72 percent of women surveyed would consider purchasing a car online to avoid the high pressure sales tactics of some brick-and-mortar dealerships.