Toyota Motor, Japan's largest automobile company, and Ford Motor, the United States' No.2 carmaker, today separately outlined online plans. Toyota announced an alliance with i2 Technologies to build an online marketplace to streamline its manufacturing process. Ford teamed with Trilogy Software, the parent company of Internet auto-shopping site CarOrder.com, to develop and run the automaker's global customer Web sites.
The deals are just the latest in a spate of moves by automakers to harness the power of the Internet. They seek to reach more customers while slashing productions costs and reducing the number of unwanted surplus models clogging dealer inventory. The proliferation of online car-buying services, such as CarsDirect.com and Autobytel.com, also has forced carmakers to re-evaluate how to use the Web to their advantage.
"Consumers are squeezing every last penny out of the retail process--lowering the margin for retailers and manufacturers," said Chris Denove, director of consulting operations at J.D. Power and Associates. "On one hand, the Internet is fueling the need for cost savings, and on the other hand, it is providing the tools enabling businesses to cut costs."
Most carmakers see an online road without potholes if they can lower costs by establishing online hubs that connect their assembly plants to parts suppliers. General Motors, the world's No.1 carmaker, recently created TradeXchange. Ford teamed with Oracle to start AutoXchange, hoping to build a bridge between its disparate needs and operations.
"Although the business-to-business side of the Internet is nowhere as sexy as the consumer side, it is likely to have an even greater short-term impact on the industry," Denove said.
Automakers are also hoping that by more closely understanding the needs and desires of car buyers they will avoid maintaining a costly inventory of unwanted models.
According to some analysts, the increased focus by carmakers on establishing business-to-business (B2B) marketplaces online is part of a long-term shift in the industry toward slowly becoming a built-to-order business--much like Dell Computer, which builds a computer only after a consumer purchases a system with exact specifications.
"The B2B moves speak to the industry's desire to streamline and simplify the entire process," said Rob Leathern, an analyst at research firm Jupiter Communications. "(Carmakers) are seeing that in order to transition to a built-to-order system, they need to integrate the entire supply chain."
The online car industry represents one of the biggest market opportunities in e-commerce. Americans spent about $289.2 billion on motor vehicles and car parts in 1998, the last complete year for which the Department of Commerce has records. Forrester Research has estimated that the online market will grow from about $400 million this year to about $16.6 billion, or 4 percent of the total auto market, in 2004.
On the consumer front, Priceline.com has expanded its "name-your-price" auto site to 13 new states. The service is now available in 26 states, including California.
Prior to Ford's deal with Trilogy, the company cut a marketing deal last month with Yahoo. GM signed a similar deal with America Online. Also last month, Blue chip venture capitalist firm Kleiner Perkins launched Greenlight.com, a new online auto site that represents a collaboration with local automobile dealerships.