July 3, 2018 — The Banks Report has compiled a list of 32 different companies providing aspects of the digital retailing/online transaction process in the automotive industry. The list has grown since our initial report in January on digital retailing. In addition, TBR is putting together an analysis of what’s actually working on the online transaction front, which will be published later in the third quarter.
Independent Used-Vehicle Chains
- Carvana — Online used vehicle retailer known for its vending machines. It completed an IPO in 2017. The company is in 63 markets now (looking to be in approximately 100 by end of the year) delivering vehicles to 48 states. It has a current market cap of nearly $1.2 billion. While revenue jumped 1275 to $360 million in the most recent quarter, losses also went up 40%. Positives: Confident and aggressive growth strategy. Innovative — acquired augmented reality company this year. Willingness to find ways to partner with brick and mortar dealers. It’s getting closer to Manheim – will help with inventory procurement. Attractive acquisition target for Amazon. Ernie Garcia Jr. is dynamic and likeable on camera. We also like the board. Concerns: Losses need to come down. Apparent inefficient operations — revenue per employee is less than half of what similar metric is for the seven publicly traded traditional dealer groups (including Carmax). Needs to wean itself from Drivetime operations more aggressively. Employee reviews seem to indicate a haphazard operations. Nevertheless, the recent growth is impressive.
- Vroom — Online used vehicle retailer (acquired Texas Direct Auto, one of the country’s top selling used vehicle dealers in December 2015). With $295 million in funding ($76 million this year) Vroom is selling approximately 6,000 vehicles a month. This Spring, Vroom shut down operations in Indianapolis and laid off nearly 50% of the staff. Sources say the company is under pressure from investors to focus on profitability. Also, reported problems integrating Texas Direct Auto haven’t produced the results hoped for from the acquisition a couple of years ago.
- Carmax — Carmax appears to be making a move into the digital retailing space bundling various aspects of the car buying process its piloted the last couple of years into one solution it will begin making available across its stores in the near future.
NOTE: The three companies above are used-vehicle dealerships (Carvana and Vroom are strictly only retailers). We’ve included Carmax primarily because of the potential competitive relationship with the other two players. We also believe how Carmax implements its solution could be a model for other dealerships — if it’s successful.
TBR also believes either Carmax or Carvana could be ideal acquisition targets for Amazon should it decide to move into the retailing of vehicles. Both provide a ready-made distribution infrastructure for vehicles — a critical piece Amazon does not have. Both companies also are able to source inventory. Add to that, the financing relationships and automotive retailing expertise both companies have and an acquisition of either or both companies makes sense. An acquisition of Carmax combined with Carvana would be a good launching point for Amazon, in our opinion.
Online Transaction Solutions for Dealers
- Drive Motors — Online ecommerce app for car dealers. Publicly traded Asbury Automotive, one of the country’s top 10 largest dealer groups, white labeled Drive Motors’ solution for its Push Start online buying program. in July secured $5.2 million in seed money in a round led by Bullpen Capital that included Y Combinator, Khosla Ventures, Perkins Coie LLP and Emagen Entertainment Group. Founder Aaron Krane started the company (launched out of Y Combinator) in 2015 to provide dealers with true e-commerce solutions that enable them to sell cars online. In early fall of 2017, Drive Motors said it was processing 1,000 monthly car orders for dealers, with more than $250 million in annual orders.
- Roadster — Dealers can white label Roadster’s Express Storefront online ecommerce app. The company pivoted from being a vehicle concierge service to providing technology that streamlines the online buying process for consumers. In July, Roadster added an accessories menu to its storefront solution. In addition to being a preferred vendor for Lexus, it also announced adding powerhouse dealerships Longo Toyota and Paragon Honda as clients last year along with publicly traded Lithia Motors, one of the top five dealer groups in the country. Roadster also announced last week (June 25) that early investor Costanoa Ventures (previously $7.5 million) has led a recent investment $15 million, bringing total investment in Roadster to $30 million.
- WebBuy — Developed by dealers (RimRock Automotive) and designed for dealers, the company is just now beginning to announce itself to the auto retail sector, so expect to hear more from them over the next several months.
- TagRail — This company just launched its Digital Retail Platform earlier this year. It’s designed to create a seamless buying experience for customers allowing them to conduct 95% of the process online before coming into the dealership to sign paperwork and take delivery of the vehicle. Last week, Lexus announced TagRail is a preferred vendor for its digital retail solutions.
- FastLane — This Dallas-based company was founded in 2016 by Brandon Hall. It announced a $1.5 million seed round led by Eagle Venture Fund in December 2017.
- MakeMyDeal — MakeMyDeal was developed by Cox Automotive and launched in 2015. The solution allows the consumer to start the deal process online and allows for some back and forth “negotiation” between the dealer and the customer. For Cox, it’s not necessarily a “click and buy now” market today although, it may evolve to that in another 10 years or so. MakeMyDeal’s focus is to maintain the human relationship aspect of buying and selling a car. Expect to see more from Cox this year in the online transaction space as it begins implementing it into its Autotrader platform (See Accelerate below — which is replacing Make My Deal).
- Dealer Inspire — Dealer Inspire is a website and digital advertising platform that offers online transaction capabilities with its Online Shopper product. The company recently launched Alex, an artificial intelligence bot as part of its Conversations (chat and text messaging) solution. Keep an eye on this company. It has an innovative culture and is aggressive when it comes to jumping on new ideas and rolling out new solutions. (Cars.com acquired Dealer Inspire this spring for $166 million/$200 million possible).
- Dealer EProcess — Has a virtual reality chat bot named SARA that helps the customer navigate the online digital retail process on the dealer’s website.
- CDK Global Connected Store — Digital retail solution that integrates into CDK’s other solutions (CRM, CRM Credit, Desking). Pricing includes F&I accessories options.
- DealerSocket — Launched their Precise Price solution more than a year ago. More of a pricing tool, but claims to integrate incentives, taxes, trade, financing, downpayment etc. and includes a “Save and Finish Later” button.
- ELead1One — DealBuilder launched this year at NADA. It integrates into the ELead CRM solution. The Online and Showroom versions are synchronized allowing customer to start the deal on a mobile device and conclude it at the dealership. Integrates pricing information such as incentives, taxes, financing, trade, downpayment etc.
- Darwin Automotive — Launched late in 2017, Darwin Online, its digital retailing product, uses predictive analytics to provide a personalized menu of F&I products to the customer. The company’s F&I technology (which is patented) powers ELead1One’s DealBuilder solution and CDK Global’s Connected Store solution. Overall, the tech is being used in some form by more than 2,500 dealerships. Phil Battista, a former dealership owner, is the founder.
- Accelerate — Cox Automotive’s newest digital retailing solution is replacing its MakeMyDeal product. Cox began a pilot it in 24 Las Vegas dealerships in January that is also integrated on KBB & Autotrader websites. Currently, about 10% of listings on Autotrader are available on the Accelerate solution. That should hit 20% in a couple of months at which point Cox will begin a national advertising campaign. Accelerate should have full transactional/e-contracting capabilities by the National Automobile Dealers Association convention in early 2019. Early results show dealers are getting an average of 15 deals a month. Dealers who market the solution are generating anywhere from 40 to 60 deals a month. Also important is that dealers treat Accelerate deals as real sale and not as an opportunity to sell an appointment.
- JoyDrive — An new solution touting new cars launched in February. Just signed a deal earlier this month (June) with 20 dealerships in Texas (mostly from the Classic/Tom Durant group). Now has 48 dealerships on its website providing inventory. Company was founded by Hunter Gorham, former GMAC/Ally Financial executive. JoyDrive secured $1.05 million in seed money in February.
- CarBlip — Brand new to the auto retail scene, the Santa Monica-based startup announced a $2 million seed investment last week led by Nordic Eye Venture Capital. Also participating is seed capital investment firm Science. CarBlip doesn’t appear to be a true transaction-based app. Rather, it’s more of an online negotiating app. Shoppers can select live inventory by swiping on the vehicle of choice (part of that Tinder influence) and make an offer anonymously. The dealer or seller can counter offer. Once a deal is agreed upon, the customer still has to go to the dealership to complete the paperwork and purchase. Without the financing, trade and other aspects of the car purchase available, this looks like an app that might have been sufficient a couple of years ago, but not now. Also, it’s only available on iOS devices for now.
Online Financing/Fintech Solutions
- AutoGravity — This mobile and online app matches customers with lenders. The consumer selects a vehicle, then selects a dealership and then applies for financing. AutoGravity presents the customer with four financing offers (all from the lenders used by the dealership). AutoGravity gets paid once the customer buys the vehicle using the financing found using AutoGravity. In 2017, Volkswagen Credit invested a reported (not confirmed) $30 million in a Series B round of financing. In 2016, Daimler Financial invested $30 million into Autogravity in a Series A round. That investment followed a $20 million seed financing from DA Investments (a Daimler investment arm) in 2015 when former Daimler Financial executive Andy Hinrichs founded the company. As of the beginning of 2018, it’s generated more than $2 billion in financing requests and 1.3 million downloads of its app with more than 1,400 dealers across 49 states on the platform.
- AutoFi — This mobile app enables customers to secure financing and conduct the entire purchase online. Customers select the vehicle via the dealership’s mobile app. Then they complete the finance application and based on approval, the customer then can select various F&I products offered by the dealership. In states where econtracting is available, customers can sign the documents via the mobile app and then pick up the vehicle. The company announced this month that Chase Auto Finance has signed on to offer financing through its platform. AutoFi secured another $10 million investment in August, bringing its total to $29.5 million since November 2015. Investors in the latest round, which was a Series A investment, included current partners Crosslink Capital, Ford Motor Credit and Lerer Hippeau Ventures. AutoFi likely will announce several partnerships with other key automotive lenders in the next few months.
- SpringBoardAuto — This is a direct to consumer online lending platform focusing on the subprime market. It’s now in 22 states. CUNA Mutual Group, which helps credit union customers with investments and insurance, invested in Springboard in 2016.
- Honcker — One of only a couple of mobile apps devoted to leasing. The platform enables customers to secure a lease via the mobile app. As of this spring, more than 300 dealerships across several states with approximately 30,000 vehicles listed were using Honcker. The company offers a concierge service delivering the vehicle to the customer. It will also pick up lease returns. In October, the company announced it had secured $3.6 million in seed financing from Evolution Corporate Advisors and Lead Edge Capital. In February, the company announced a $23 million Series A investment from InterActivCorp (IAC). Nathan Hecht is the founder.
- ClearLane — In April, Ally Financial launched this online marketplace connecting customers with numerous lenders. Customers are able to either refinance their vehicles or secure financing on a new purchase. The move stemmed from Ally’s acquisition of Blue Harbor in 2016, which it then re-branded as ClearLane.
- Capital One Auto Navigator — A couple of months, Capital One introduced an augmented-reality component to its mobile financing app. Waving or pointing the phone (with the app open) at a vehicle will pull up a list of similar vehicles for sale in the area along with pricing and financing options.
- CarLease.com — Full service concierge-level leasing app that helps customers find the best vehicle at the best lease terms available. The company also provides commercial leasing services. Founded this year, Carleas.com is led by CEO Andy O’Dower, a former Cars.com exec, and Chairman Mitch Golub, who founded Cars.com and oversaw its $.2.8 billion sale to Gannett a few years ago.
- ELend Solutions — This is an industry agnostic platform with a suite of finance and credit solutions that interact with any of the dealer’s service providers, CRM vendors and lenders. The platform allows dealers to match customers with the right vehicle and the lender with an accurate deal before the test drive is completed (while also incorporating the trade in into the equation).
- MarketScan — This company was founded in 1988 and has evolved with the market. Today’s platform is able to incorporate all of the variables that go into a lease or financed deal to provide the best terms for the customer while maximizing dealership profitability.
- RouteOne (Maxim Trak) — RouteOne’s acquisition of MaximTrak last year (2017) enabled the company to move into the digital retailing space. MaximTrak announced in March the launch of its digital retail solution FLITE Engage. The solution uses predictive analytics to show personalized F&I products to customers. The solution is customizable enabling the dealer to implement it into current work flow and business processes. RouteOne also is driving the e-contracting initiatives.
Private Party/Peer-to-Peer Buying and Selling
- Blinker — Rod Buscher, former president and cofounder of the John Elway dealerships and Summit Automotive Partners, started developing Blinker in 2013 and launched it in March 2016. It’s a mobile app that enables buying and selling among private buyers. The app, which has 150,000 downloads and has processed 3,500 transactions, is available in Colorado, Texas and Florida (where it just launched this month).
- Shift Technologies — Shift launched as a strict peer-to-peer mobile app but in December 2016 signed an agreement to list inventory from Hertz on its platform. According to the partnership, 20% of Shift’s listed inventory has to come from Hertz. At the same time, the company also reconfigured operations to focus more on inside sales operations. The agreement with Hertz allows Shift to focus less on inventory acquisition — a costly and convoluted process — and more on driving sales through its app. The partnership with Hertz also likely helped Shift land a $38 million investment led by BMW iVentures, bringing its total raised to $110 million. Other investors in the latest round which occurred in the third quarter 2017 include DCM Ventures, G2VP, DFJ, Highland Capital and Goldman Sachs Investment Partners. A recently announced partnership with Manheim will help with reconditioning and storage challenges.
- Instamotor — Until last fall, this was strictly a peer-to-peer mobile app for buying and selling cars. But in September, the company announced it would allow dealerships to list their inventory on the app also. The company launched in 2014 and is available in markets in California and Texas. Cofounder Valentin Gui has a background in automotive retail serving as business development director for the fast growing Victory Automotive Group after graduating from the University of Michigan.
- Tred — This startup launched in 2012 out of Seattle’s TechStars group, to great media fanfare (partially due to former General Motors chief Rick Wagoner being on the board). Originally slated to deliver test drive vehicles for dealers to customers’ offices or homes, the company pivoted in 2014 to focus on buying and selling cars online. The company has since narrowed its focus to help owners sell their vehicles. The sellers tool is only available in Los Angeles, Portland and Seattle as of now. The company pushes the listings of vehicles uploaded by private sellers to its app to numerous media partners across the industry. Last year, Tred signed a deal with Ally Financial enabling the finance company to offer F&I-related products to customers buying vehicles listed on the app. Between 2011 and 2015, the company raised approximately $2.8 million in investment capital.
- ebay Motors — Not a new entry in the space — but definitely the oldest, and as a result, often get left out of the conversation. eBay Motors has led the charge on peer-to-peer online vehicle sales since the early 2000’s. But because of its auction-based model, it doesn’t quite fit with today’s new entries that push the ease of transaction. Nevertheless, eBay Motors has built a profitable business enabling the buying and selling of cars online. The question is, what’s Amazon’s next move?