Internet, Auto Industry Learning to Get Along

Nearly half of automobile dealerships (48 percent) in the United States are using the Internet to purchase used vehicle inventory, according to a study by Q2 Brand Intelligence, which found the Internet becoming an increasingly important part of the auto industry.

A similar study last year by Q2 found that only 12 percent of dealers were using the Internet to purchase their used vehicle inventory.

Online purchasing by dealers will likely continue to grow, as dealers’ experience with the Internet has been a positive one. More than four of five dealers who have purchased used vehicles online say they will do so again. In addition, 17 percent who obtain used vehicles online purchase at least 21 percent of their used vehicle inventory via the Internet.

“It’s apparent that there’s a strong movement among dealers to use the Internet to acquire used vehicles,” Q2 Brand Intelligence vice president David Bauer said. “In business it can be difficult to recognize more effective operations methods until such methods are made available. Now that dealers are beginning to see the benefits the Internet affords in terms of cost and convenience, there’s a big move in that direction.”

The survey was commissioned by Autodaq Corp., a provider of Web-based software, technology and related services to the automotive re-marketing industry. It surveyed 250 dealer principals, general managers, used car managers and used car buyers throughout the United States.

Increased challenges to acquiring used vehicles seem to be the reason dealers have gone online. Forty percent of dealers report that simply locating quality used inventory has become a greater challenge, up from 37 percent last year. Dealers also seem to have fewer resources, as the number of dealers listing “lack of time” as an impediment jumped significantly, from 10 percent to 17 percent. Conversely, issues surrounding used vehicle pricing dropped slightly from 27 percent to 25 percent.

Using the Internet to acquire used vehicles isn’t the only way dealers have made the Internet part of their day-to-day operations. According to the survey, 92 percent of dealers report using the Internet at work, up 14 percentage points from 2000. Almost all (98 percent) dealers now have their own Web site, up 4 percent from last year.

The third annual Cars Online survey by Cap Gemini Ernst & Young, revealed sharp differences within the automotive industry in attitudes toward the Internet. Some 79 percent of respondents working for motor manufacturers perceive the Internet as either an opportunity or a great opportunity for their business and only 21 percent perceive the Net as a threat. But among car dealers, 63 percent of those interviewed regard the Internet as a threat and only 37 percent as an opportunity.

The Cap Gemini survey is based on interviews by the Gartner Group of 8,000 consumers, 800 car dealers and leading car manufacturers in 10 countries: the United States, Britain, Germany, France, Italy, Sweden, the three Benelux countries and Japan.

The percentage of consumers with Web access visiting a manufacturer’s site ranged from 31 to 43 percent in most countries, compared with typical figures of 27 percent visiting franchised dealer sites, 15 percent independent dealer sites and just 14 percent visiting specialist car broker sites. Visits to the sites of the major manufacturers’ Web sites in 2001 exceeded visits to all automotive Web sites in 2000, suggesting that they are now providing much of the online information that consumers need.

Use of the Internet by car buyers has risen sharply in the last 12 months, with 38 percent of consumers in 2001 describing it as an important source of information on vehicle features and prices for their next purchase compared with 27 percent in 2000. The Web is now rated more highly for car information than print advertising, which only 29 percent of consumers thought important, and scores double the rating of television advertising, which just 19 percent ranked as important.

The percentage of car buyers using the web to purchase a vehicle is also rising rapidly, although it remains relatively small. According to the Cap Gemini survey, online purchasing of vehicles has increased in the United States over the last year from 1.6 to 3.0 percent of total sales (about 400,000 vehicles). In Germany online buying has increased from 0.7 to 1.6 percent of sales, and in Britain online car buying has increased even more dramatically — from 0.1 to 1.1 percent.

The increased comfort consumers have with the Internet and with using the Internet to buy cars has manifested itself in two Web features auto consumers are starting to demand. Apart from product and price information, 45 percent of consumers interviewed said they wanted online configuration as a key service, enabling them to experiment with different vehicle specifications and options and then immediately discover the price and delivery implications. And 35 percent quoted order tracking (the ability to inspect online the progress of their vehicle toward final delivery as it moves through the assembly and distribution system) as a feature they required.

“Clearly many consumers are no longer content with Web sites that are mere electronic brochures,” said Pierre Durand, head of Cap Gemini Ernst & Young’s Automotive Centre of Excellence. “They expect the data on their screens to be linked in real-time with what is happening all the way down the supply chain, and satisfying this need is in my view one of the big challenges that the industry must, can and will now address. Our survey shows that car buyers need the industry to make faster progress towards the build-to-order model with firm delivery dates promised at the time when the order is placed. In the Internet age, these missing links in the automotive supply chain must be quickly found and put in place.”

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