Online Auto Sales Are Revving Up, IDC Says

FRAMINGHAM, MA – MAY 25, 2000 – Sales of new automobiles over the Internet have pretty much been stalled during the last few years, but the market is moving now, and before long, it will be in the fast lane. According to IDC, U.S. new automobile sales revenue generated from the Internet will accelerate from $2.1 billion in 1999 to $27.3 billion in 2004.

"Reducing the cost of any good increases the product's consumption, and there's a lot of room for the Internet to reduce the cost of car buying," said Jonathan Gaw, research manager with IDC's Consumer eCommerce: Major Purchases research group. "For auto consumers, costs involve the time and patience it takes to wade through a complex process made even more so by the artificial complications introduced by the automobile distribution system. The technology exists to dilute those complications, and the online auto sales industry has used those tools more aggressively than ever before over the past year. Instead of being mere adjuncts to car dealers' marketing, online firms have begun to change the auto sales process by promoting up-front, no-haggle pricing."

No major technological barriers exist that would inhibit online car sales. Instead, the obstacles that have to be overcome are systematic. According to IDC, automobile dealers, online firms, financing and insurance companies, and manufacturers need to find a way to co-exist and an appropriate business model needs to be developed.

Online referral systems, which were popular in the past, are falling out of favor. Instead, firms that promise online, up-front no-haggle pricing are increasing in popularity. Manufacturers want to deepen their customer relationships and might try to turn dealerships into showrooms and delivery points while they maintain the customer relationship.

"Dealers are wary of online schemes that threaten to cut them out of the process, and no system of selling new cars will work in the long run without their participation," Gaw said. "To gain dealer acceptance of and participation with Internet sales, online firms must create programs that allow dealers to share in the rewards of revenue associated with new car sales beyond the sale itself."

For online auto sales to be successful, the sale will have to be as seamless as buying books online. Warranties, leases, vehicle options, financing, and insurance decisions will all have to come together.

IDC's new report, Online Auto Sales Market Forecast and Analysis, 1999-2004 (IDC #B22253), analyzes market opportunities for online auto dealers. The report forecasts auto sales revenues generated by the Internet through 2004. Additionally, it describes the different business models of online new automobile sales, looks at the demographics of typical buyers, and examines factors driving and inhibiting market growth. To order the report, contact Demetra Georgakopoulos at 1-800-343-4952 extension 4496 or at dgeorgakopolous@idc.com.

About IDC

IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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