It’s Pedal To The Metal For Online Car Sales

Digital Car Sales

With estimates that U.S. automobile sales may fall by 22 percent to just over 13 million vehicles sold in all of 2020, the process of buying a car continues to undergo its own digital reinvention. 

Investments and attention are focusing less on trends like electric vehicles or hybrids and more on car-buying at a suitable social distance, with app-like convenience taking much of the traditional hassle out of the dreaded car lot visit.

Established dealers reacted by aggressively expanding website selling that’s been in place for years, with one Michigan auto dealer telling The Wall Street Journal in late June, “I truly believe we sold more cars last month because we’re finally utilizing technology more efficiently.”

The real action, however, is in concepts that disrupt the dealership model and the punchline-worthy bad customer experiences long associated with it. And while car manufacturers are in a COVID slump, some expect car sales to actually increase as lingering pandemic fears may reverse trends like fractional car ownership and short-term leasing.

Digital Auto Shift Gets Into Gear

Wherever 2020 sales numbers end up, the way those sales are generated will be different. 

In the used car market, Carvana reported a resounding second quarter, with revenues of $1.12 billion and nearly 56,000 units sold – an increase of 13 percent over 2019 – with the number of cars sold up 25 percent year over year. 

In a letter to shareholders, Carvana Founder and CEO Ernie Garcia said, “COVID-19 has caused all of us to reevaluate our shopping behaviors. Many people who previously would not have considered buying a car online are giving it a second thought. In a recent CarGurus survey, 60 percent of respondents said they were open to buying a car online versus 32 percent before. We believe this shift is here to stay.” 

At rival Vroomshares doubled from an opening price of $22 on their initial public offering (IPO) in June, showing a hardy investor appetite for digital car sales. Vroom CEO Paul Hennessy recently told PYMNTS CEO Karen Webster that there’s been a “small chilling factor on the business” from COVID-19, making consumers more willing to buy a car online. 

Vroom uses a variety of methods to unseat legacy on-site auto sales, including a seven-day period during which the customer — after contactless delivery of the used vehicle via truck — can drive around and make sure it’s the car they really want. So much for the old test drive. 

“It’s a better experience than driving roughly a mile around the dealership, and then returning to a high-pressure sales situation,” he said. “That’s a really difficult way to experience a car. You should be able to take it to work, drop off the kids, use it on the weekend…” to get a feel for it.

Completing what at present is a three-way auto race, online dealer Shift announced in June its plans to cash in on used car fever with a Q3 IPO in a reverse merger with Insurance Acquisition Corp. 

This sets up ideal conditions for market watchers to observe how digital-first automotive sales approaches may not only get over the COVID hump, but also reenergize car sales more broadly. 

“An Entirely New Market”

Taking on the powerful alliance of car manufacturers and auto dealerships has been slow-going for disruptors like Carvana, Vroom and Shift, whose combined market share pre-COVID was estimated at about 1 percent of used car sales in 2019, or roughly 300,000 units. 

As in other sectors, digital is increasingly seen as crucial to auto’s recovery. PYMNTS reported in March that “the online car business will take a huge hit from the crisis disruption., which has posted strong sales numbers but has had to answer to some liquidity issues from analysts, has implemented a program that includes 50 percent off April bills and 30 percent off May and June bills automatically applied across and DealerRater.”

Still, there’s a growing sense of anticipation and excitement around the digital channel for cars.

“Investors are excited by the prospect of an entirely new market for online players to displace traditional sellers,” the WSJ reported. “Carvana’s shares, which have climbed steadily since late March, have jumped eightfold since the company’s 2017 initial public offering. Vroom shares have more than doubled since its IPO.”



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