GM Selling Cars on eBay: A Q&A on How it Will Work

With great fanfare, General Motors and the online auction site eBay shook hands and announced that they were going to start selling new cars together on the Internet (in California, only, and from now until September 8). Neither party was willing to disclose financial details of the limited program.

Some 225 California-based GM dealers are taking part in an arrangement that incorporates all the traditional eBay features, such as "Buy it Now" and "Best Offer" (buyers say what they're willing to pay, and negotiate with the dealer). Rob Chesney of eBay says 12 million car shoppers visit the site monthly, and the program will help GM "extend their physical showroom."

Here's how the program looks on video: Car dealers have had surprisingly little success selling cars online, without customers visiting a dealership first. A J.D. Power survey says that 75 percent of new car buyers currently use the Internet to shop (up from 70 percent in 2007). And the time shoppers spend online is up 12 percent. But according to AutoTrader.com's Mark Scott, only 10,000 people a year go through the whole car-buying experience without actually going to a showroom.

In the interest of helping to understand how this program will work, I solicited further information from both GM and eBay, and here's what I learned in Q&A format:

Does GM have a sense of what percentage of its California volume might be met this way? John M. McDonald, GM spokesman: We'll take every single additional sale. Our goal is to try and drive conquest sales and get on shoppers' consideration lists. We have a market share opportunity in California, and partnering with eBay is one exceptional way to get in front of people shopping for vehicles online.

Surveys show that only 10,000 a year actually make purchases online without visiting a showroom. How do you overcome the need to "kick the tires"? Rob Chesney, vice president of eBay Motors: Consumers are becoming increasingly more comfortable with the online shopping experience, especially as it relates to high-end items like automobiles. The volume of vehicles listed on eBay Motors has progressively increased since the marketplace launched in 2000 and more than three million vehicles have been purchased sight unseen. By providing buyers with more options to buy online, eBay Motors has found ways to connect shoppers and buyers online, in this case potential shoppers with dealers, and give them the chance at the best deal at a point when consumers are increasingly more comfortable with purchasing high-end items, like automobiles, online. How did this deal originate, and did money change hands? Whose idea was it? Rob Chesney, eBay: eBay Motors has worked with GM in the past on initiatives such as the Certified Pre-Owned program on our site. As part of GM's reinvention strategy, they are looking to offer their customers new ways to purchase. As more and more consumers shift to shopping online, it is important for GM to cater to where their customers are, which is online. We are not disclosing the monetary terms of the agreement.

Why not Cadillac as part of this? John M. McDonald, GM: It is a voluntary program, and Cadillac elected not to step in quite yet. They may in the future and they will be watching the outcome of our California initiative very closely.