SAN FRANCISCO (03/08/2000) - Auction site eBay has forged a partnership with AutoTrader.com to create a classified-ad Web site where individuals and car dealers list used cars for sale.
The joint site - www.ebay-autotrader.com - launched Tuesday, and allows customers to bid on used cars, motorcycles, trucks and auto parts. Under the deal, eBay takes an equity stake in AutoTrader. More detailed financial terms were not disclosed. Ebay says it first recognized the potential of used car sales about a year ago, when the number of listings (under "miscellaneous," since eBay had no car category) proliferated. Since then, eBay has added an "automotive" tab to the site, which currently holds over 3,000 car listings.
That's peanuts compared to AutoTrader, which launched in May 1998 and has 1.5 million listings on its site. The deal between the companies will direct eBay users who wish to buy or sell an automobile to the joint site. AutoTrader customers can choose whether to list the old way, on AutoTrader's classifieds site, or pay $25 and auction off their vehicle (sellers will pay another $25, split between the two sites, after a sale is finalized).
"We believe that the online auction format has really great potential," says AutoTrader President and CEO Chip Perry. AutoTrader and eBay, he says, plan a multimillion-dollar advertising campaign to lure consumers to the joint site.
Used cars represent a rapidly growing segment of the online auto market. And despite being left in the dark about the financial details, analysts were upbeat about eBay's deal. "AutoTrader has the supply and eBay has the reach, so the partnership makes sense," said Merrill Lynch analyst Henry Blodget in a letter to investors. "We maintain our thesis on eBay that it will begin to penetrate further into the newspaper classified market - cars are a big piece of this."
Following the announcement, eBay shares closed up slightly, at 162.81, from Monday's close of 161.56. But competitors aren't worried. Adam Simms, CEO of used-car site iMotors.com, argues that the deal is good in driving more auto commerce online. iMotors sets its own prices and buys from both dealers and individuals, and Simms emphasizes that, unlike auction sites, iMotors carefully controls the customer experience.