Originally created 04/17/99

Autos sales speed up online



The list of things we can do at 2 o'clock in the morning with our personal computers grows longer by the day: pay bills, chat with other insomniacs, buy books, make dates.

And, increasingly, shop for a car.

For the 13 million Americans each year who buy a new vehicle, the Internet has become a gold mine of information, much of it free, to help them compare competing models, apply for financing, find a local dealer and even get a price quote.

There are hundreds of sites, sponsored by auto manufacturers, dealerships, government agencies, insurance industry groups, consumer and car-buff magazines, newspapers, financial institutions and an assortment of new and used car price information services.

J.D. Power and Associates, the market research firm based in California, estimates that a third of those buying new cars for personal use, about 4 million people, will use the Internet in some way this year to help them purchase a car, in most cases for gathering information. J.D. Power expects the number to grow to almost half of all buyers in the next two years.

But Internet buying is something else, and an intensifying debate is raging within the industry over whether two people communicating via mouse and keyboard will ever completely replace the face-to-face horse trades during which price, financing terms, trade-in value and other details are hashed out -- a method that is as old as the auto industry itself.

Some, like James McQuivey, senior analyst for Forrester Research in Cambridge, Mass., say that day will come because consumers see it as a way to take control of the process. "The impact the Internet is going to have is on the research and negotiating side of things," he said.

But skeptics abound. "The Internet can be a powerful tool," said Mike Morrissey, a spokesman for the National Automobile Dealers Association. "But we are on guard against an impersonalization of the buying experience."

Some dealers contend that those who visit dealerships to shop tend more often to be serious prospects. They say many buyers use online pricing services simply to negotiate lower prices at competing dealerships.

And some dealers say privately that the only buyer who will hear their real "best price" is one who is deemed serious and not just shopping around.

J.D. Power, which thinks the outlook for pricing services is iffy, says one of its surveys, done last year, found 69 percent of buyers who bought the traditional way "very satisfied" with the dealer, vs. only 56 percent of consumers who used price services.

Specifics vary but Internet services all operate basically the same: Customers specify the exact model they want, including options and any financing needs and trade-in. That request for a price is conveyed via e-mail to dealers, who have pledged to quote customers the best price possible, up front, by e-mail, telephone or fax. Customers agree to take it or leave it without haggling.

That suited one customer, Brian Wolf of New York, just fine. Wolf, 42, visited dealerships and got price quotes for the '99 Lumina he wanted, then contacted a different dealer through one of the five buying services -- Autobytel.com. "I'm not good at haggling," Wolf said.

His purchase price, he says, was about $100 over dealer invoice. "Nobody beat the price," Wolf said. "It was fair."

But the future role of the Internet in American auto retailing also is very uncertain.

Some view it as a step toward manufacturers taking control of retailing, with dealerships becoming no more than field offices to deliver and repair cars. "We're still a long way off," said Chris Denove, director of consulting operations at J.D. Power. But, he says, it's possible that Internet car buying could ultimately lead to direct sales from manufacturers to consumers.

Several recent developments have kept the issue hot:

--General Motors said last month it was expanding from four regional test sites to nationwide coverage GM BuyPower, a Web site through which prospective car buyers can get price quotes from five local dealers. GM says almost three-fourths of its 7,800 dealers have signed up.

--Last month's initial public offerings of stock by two of the largest Internet shopping services, which link customers with subscribing dealers promising special deals, suggested that Wall Street is bullish about the industry's future; the offerings by Autobytel.com Inc. and Autoweb.com raised a total of $173 million.

--Daewoo, a North Korean car maker that is struggling for a foothold in North America and already does most of its retailing through company-owned stores, plans a pilot online program in California later this year. Under the program, a customer will be able to make a deposit on a car over the Internet, arrange for financing and have the car delivered and the final paperwork completed at the customer's home or office -- something many individual dealers will do, but is unusual as a manufacturer's program.

"At this point in time, the Internet is just an information source," said Bill Tucker, marketing director in the United States for Daewoo, which sells cars at fixed prices.

Its plan comes amid disappointing results from an innovative program using college students to spread the word about its cars on campuses.

While the future of Internet buying might be in question, the growth of the Internet as a sales tool is not.

J.D. Power says only about 7,300 of the more than 20,000 new-car dealerships nationally are linked to price services, but noted that was triple the number a year earlier.

At Autoweb.com, based in Santa Clara, Calif., spokeswoman Colby Grimes says it has about 4,500 dealers signed and is one of the largest pricing services.

Denove of J.D. Power says most dealers prefer to do business face-to-face, where opportunities are better to sell consumers extras, such as financing and extended warranties, which, says Denove, are dealers' major sources of profit.

Major car makers, while increasingly marketing vehicles on the Internet, are taking a go-slow attitude about the selling of cars via the Internet. Rick Wagoner, the president and chief executive of General Motors, says his people are putting a lot of research into the issue but that it is likely to catch on first with younger buyers who tend to be more comfortable using computers.

"I would never buy a car over the Internet, but my kids would," Wagoner said.

He has three, ranging from 8 to 15, and they are members of a huge population bubble heading into its car buying years: Generation "Y," the 70 million children of the baby boomers.

Car makers say their numbers will make the marketing of cars via the Internet absolutely critical. "These customers obviously will be more computer literate," said Jim O'Connor, president of Ford Motor Co.'s Ford division. "So Internet marketing will be key."

But even car makers with the youngest customer groups question whether an e-mail conversation will ever will take the place of face-to-face neogtiation or a test drive.

Said Lynn Myers, general marketing manager of GM's Pontiac-GMC division, "We think people want to visit dealers and see the car," she said. "It's that experience we think helps consummate the deal."

Auto executives say that, while consumers tend nowadays to arrive at dealerships well researched, the choice of a car and a dealer still involves a certain degree of emotion and subjectivity.

Factors such as styling, the overall "feel" of the car during a test drive, the aroma of its leather upholstery and the personality of the sales person still can help make (or break) a deal. "I don't think you can create that level of motivation on the Internet," said Mike Seergy, vice president and general manager for Nissan of North America's Nissan division.

Even at GM's Saturn unit, unusual for its one-price no-haggle policy, executives say that, while they encourage customers to research its cars by visiting its Web site, they are worried that selling via the Internet could harm its well-documented warm and fuzzy reputation for customer handling.

"We want to make sure," Saturn President Cynthia Trudell said, "that we don't lose than human touch."