SAN FRANCISCO (07/26/2000) - Attention, drivers: The online battle for your business has just begun.
I can't get the Francis Ford Coppola movie Tucker: The Man and His Dream out of my head. In that real-life story, set in the 1940s, a gifted entrepreneur develops an automobile loaded with revolutionary features like seat belts and safety glass. But before the American public gets to drive Tucker's wonder car, the major automakers' considerable funds, influence with suppliers, and lobbying power combine to squash him.
As I follow recent news about the car industry and the Web, I've been wondering if history will repeat itself. The National Automobile Dealers Association (NADA), for instance, has just launchedDriversSeat.com, a car-selling portal aimed squarely at upstart sites such as Autobytel.com, Autoweb.com, and Microsoft Corp.'s CarPoint. At the same time, the Big Three--DaimlerChrysler AG, Ford Motor Co. and General Motors Corp.--have teamed to develop a business-to-business site.
Are the big auto companies out to squish a new breed of Tuckers--start-up sites that are trying to change the way we buy cars? Will we be denied the cars we want and given the ones the industry wants to sell us?
After speaking with a host of experts, I feel relieved. The Web's ultimate impact on the automobile business is unclear, but the consensus is that one way or another, buyers should benefit. "The big winner is the consumer who wants more for less," says David Cole, director of the University of Michigan's Office for the Study of Automotive Transportation. "The e-world and the dealers and the manufacturers are battling it out, but the consumer only stands to gain."
Big, Big Business
No wonder the auto industry is scrambling for a piece of the Net. A recent study by Jupiter Communications predicts that online purchases will make up almost 8 percent of new vehicle sales in the United States by 2004--a projected $33 billion slice of the pie. Sales initiated online but sealed in the showroom will be even larger, predicts Jupiter: 22 percent, or $95 billion.
Already, the Web has thrown the car industry into turmoil. "The Net has changed the power structure in a car transaction," says Cole. "Typically a consumer used to shop at a few dealers. The dealers owned the relationship--they controlled the information. Now the consumer can easily shop the world via the Internet. So the power is now in the hands of the consumer."
"I can't really think of anything else in history that has caused this kind of change in the industry," says Randy Ortiz, executive director of the Consumer Ebusiness group at Ford. "And it is not so much just the change itself as it is the rapid pace of change."
How will this flux affect car shoppers? Let's start with the alliance of the Big Three automakers (which Toyota recently announced it plans to join) to build a Web site. It's not a consumer site; instead, it's a business-to-business hub designed to streamline the parts supply chain and reduce the cost of building a car. But most experts I spoke to agreed that some savings would probably be passed on to buyers. (Other industries are creating similar sites, raising questions about how cooperatively competitors should operate and encouraging the Justice Department to look into the trend.)Then there's NADA's new site. DriversSeat.com lets shoppers get invoice pricing information and find local dealers. Meanwhile, manufacturers and dealers are building their own sites that will let buyers configure cars, get price data, and locate nearby dealers. These newcomers will compete with the 20 or so start-up sites that provide similar information, act as brokers, or sell cars directly.
Where Will We Buy?
the resulting competition should yield some attractive deals on new cars. But
will shoppers flock to sites operated by the old-line car industry? "It depends
on the how up-front the dealers are," says Thilo Koslowski, senior analyst at
the Gartner Group. "If it is just a referral service, if consumers still have
to [talk to a salesperson], that will only address a limited number of online
Mark Lorimer, CEO of Autobytel, says it's great that dealers and manufacturers want to get closer to their customers, but he suspects they'll have trouble building sites that shoppers see as trustworthy and impartial. "We are the pointy edge of the consumer attack on the distribution process," he says. "The consumers want to be sure they are treated properly, and that is exactly the service we provide." For instance, Autobytel lets users post both positive and negative reviews of cars; it's tough to imagine a manufacturer's site allowing that kind of forthright discussion.
But John Holt, CEO of The Cobalt Group, which develops Web services for car dealers, thinks the fight will ultimately come down to money and resources. "If the manufacturers and dealers spend only 10 percent of their ad budget on the Internet, that's $1.2 billion," he notes. Such a sum would dwarf what independent auto-selling sites could spend. In addition, manufacturers and dealers can bring formidable lobbying muscle to bear. For instance, in response to industry pressure, states around the country have been tightening up their franchise laws, making it harder for newcomers to jump into the car-selling game.
Again, I'm reminded of Preston Tucker, who (in real life, not in the movie) responded to the big carmakers' legal attacks with an open letter in 1948.
"When the day comes that anyone can bend our country's laws and lawmakers to serve selfish, competitive ends, that day democratic government dies," he wrote. "And we're just optimistic enough to believe that once the facts are on the table, American public opinion will walk in with a big stick."
The public never got the chance, because only 51 Tucker automobiles were ever built. But these days, the consumer holds something even more potent than a big stick: a mouse. On the Web, nothing stops shoppers from surfing to another site to get information or buy a car.
As Sam Hedgpeth, COO of Autoweb, says, "As long as we provide an attractive [service] to consumers, the manufacturers will want to come here and show off their product. The key is the consumer."
The Cars We Want
as dealers and manufacturers adapt to capture the wants and needs of online
shoppers, the online marketplace should also affect what cars they build. In
theory, at least, popular models (that Chrysler PT Cruiser in gangster black,
say) should become more readily available. The Net will also let dealers
provide such after-sale conveniences as e-mail notification of a car's service
needs and the ability to schedule appointments online.
As with everything on the Web, some start-ups won't make it--because they had a bad idea to start with or a good one they couldn't sustain. But unlike American consumers in the 1940s--who were unable to buy the reasonably priced, safe automobile Preston Tucker promised them--we are, more than ever, likely to get exactly what we want.
Who knows? If Tucker were alive today, maybe he'd find a way to sell his cars--built to order--over the Internet.
Christina Wood is a PC World contributing editor.