Internet startup Autodaq Corp. has launched a wholesale auto auction that allows car dealers to shop online for used vehicles throughout the United States.
The San Mateo, California-based company, which is backed by August Capital, hopes to tap into the $93 billion (US$) wholesale vehicle market. Used vehicles will also be added to Autodaq’s online inventory as they come off leases from finance companies and banks.
Eliminate 50 Percent of Supply Chain Cost
According to Autodaq, the total cost for completing a vehicle sale through an offline auction is about 10 percent of the automobile’s value — nearly $10 billion annually. Costs include the cost of money, depreciation, transportation of the vehicle, auction fees, reconditioning and search costs.
The company claims that its technology and related services will eliminate up to 50 percent of those supply chain costs, or about $5 billion annually.
“The traditional method by which these businesses buy and sell used vehicles today is highly fragmented, inefficient and, thus, unnecessarily costly for both buyers and sellers,” said Adam Boyden, Autodaq’s chief executive and co-founder. “We have created a Web-based marketplace that greatly increases the number of buyers and sellers participating in a virtual auction to improve the bottom line for all participants.”
Faces Tough Competitors
The car auction industry is already dominated by Atlanta, Georgia-based Manheim Auctions, Inc. and Indianapolis, Indiana-based Adesa Corp. Manheim also has an online auction site, but like Adesa, operates essentially through live auctions. Autodaq’s inventory exists only in cyberspace.
Nonetheless, some industry observers point out that, if Autodaq’s model turns out to be a winner, its competitors could be expected to adapt quickly.
Autodaq plans to generate its revenue by charging the seller and buyer fees for titles, logistics and transportation on vehicles being auctioned and sold on its 24-hour-a-day auctions.
How It Works
Several weeks before vehicles come off lease, Autodaq will inspect the property, take digital photos, and upload the information to its Web site. Buyers can then either purchase vehicles for a flat fee or bid on them.
Bank One, which has partnered with Autodaq in development and pilot testing, said that it has already benefited from the service.
“So far, we have seen a gain of several hundred dollars per off-lease vehicle that we sell through Autodaq,” said Keith Kendrick, president of Bank One’s e-commerce unit. “That’s mostly because of lower transportation and auction costs and a faster sale that reduces capital and inventory costs.”
Founded in July 1999, Autodaq is a closely held company. Its investors include August Capital, Zikha Ventures and several angel investors from the Internet and automotive industries.