Internet car retailing potential doubted

It will be useful for finding information, but not the choice of many for completing deals, according to the report published by the Economist Intelligence Unit EIU.

quot;It remains to be proved whether a single extra vehicle has yet been sold because of the Internet,8221; the report said.

The report said Internet car retailing web sites have proliferated in the U.S. But they are now struggling to grow fast enough to survive, and to find the best formula that does not simply add an additional layer of complexity.

Automotive researcher J.D.Power-LMC, has said only about four per cent of deals in the U.S. in 1999 were done entirely over the Internet, although about 40 per cent of prospective customers used online computers to trawl for intelligence.

In five years, about 80 per cent of car buyers would use the Internet in some way to buy a car but only eight to 10 per cent would buy entirely from the Internet, J.D.Power-LMC said.

Ian Robertson, Director of the EIU8217;s automotive group, said until a couple of years ago there was great optimism that the Internet would become the dominant method of selling cars.

8220;The projections were that 60 per cent of car sales would be over the Internet by 2005. In reality, the report shows people using the Internet to gather information and intelligence on prices, but to conclude the deal they are still searching for the reassurance of that traditional handshake you can8217;t find over the Internet,8221; Robertson said.

8220;We are looking at a much more sober projections of the Internet opportunity where it will be one of several ways but not the only way in the future,8221; Robertson said.

Car retailing over the Internet has also been accelerating in Europe with sites like oneswoop.com, auto3000.com and kpn-consultants.co.uk. Autobytel.com Inc, leading U.S. Web car seller, is now active in Europe.

The EIU report said car retailing is inefficient and crying out for reform. 8220;There remain huge inefficiencies in traditional carretailing, where up to 30 per cent of the value of a car is expended on sales and marketing and other retail costs,8221; the report said.

But the acceleration of acquisitions, joint ventures and strategic alliances among Internet players in the U.S. shows that a successful formula has yet to appear.

The continual tinkering with formats, partners and strategies clearly indicates that Internet auto retailing is both immature and unstable at this point. What is clear is that experimentation will continue; what is not yet clear is which models will win,8221; the report said.