The Internet will be a driving force in both the new and used vehicle market over the next five years, according to a study released Monday by New York-based research firm Jupiter Communications.
According to the study, online-direct and online-influenced new vehicle sales will exceed $128 billion (US$) in the U.S. by 2004. However, reaching these sales figures will require substantial effort on the part of the automobile industry.
Jupiter said that to achieve this market, automakers, dealers, and service providers most work together to integrate the Internet into their business model.
Indispensable Tool for Research
The Internet, which allows car buyers the freedom to research various vehicles without having to deal with sales people, is fast becoming an indispensable tool for vehicle research. Jupiter found that 38 percent of online consumers have conducted auto research online.
Jupiter’s study is corroborated by a poll released last month by research firm GartnerGroup, which found that from September 1999 to March 2000, 45 percent of the 40,000 households surveyed used the Internet at some point in the car buying process and 3 percent actually bought their cars online. Only two years ago, fewer than 25 percent of online shoppers used the Internet for any part of the car buying process.
Jupiter analysts predict that approximately eight percent of U.S. new car sales, or 1.3 million units worth $33 billion, will be sold online in 2004, up from 17,000 vehicles in 1999. Additionally, the auto research that consumers conduct online will influence 22 percent of domestic new car sales in 2004, or 3.8 million vehicles worth $95 billion.
According to Jupiter, automakers, dealers, and service providers who hope to woo customers away from brick-and-mortar vehicle showrooms need to work together to make buying a car online easier than buying one offline.
“Consumers will only purchase complex products like cars online if the Internet actually improves the current process,” said analyst Rob Leathern. “While there is an abundance of information on the Web to help consumers make their purchasing decision, it is still a disjointed and cumbersome process to sort through.”
Leathern advises that automotive players — from manufacturers and dealers to financing and insurance companies — must work closely together to create a seamless car buying experience that offers consumers the efficiencies they expect in online transactions.
Jupiter predicts that those companies who do not utilize the Web aggressively will risk losing market share to those who do.
Cars on Subscription
One company that hopes to harness the power of the Web to move cars, Model E, is offering well-to-do Web users the opportunity to “subscribe and drive” customized cars.
Formed last fall and funded primarily by a $16 million investment from Softbank, the company will initially purchase existing vehicles and customize them to subscribers’ specifications. The company hopes to eventually design and build its own cars.
The company has already overcome a legal challenge by Ford, which filed a lawsuit last week claiming rights to the Model E name. Ford contended that Model E sounded too similar to Model T, one of the company’s original mass-market vehicles last produced in 1927.
A U.S. District Judge in Detroit, Michigan disagreed Monday, the day Softbank officially announced Model E, and dismissed the auto giant’s lawsuit.