VW's Net engine idles

While some big automakers do big business online, Volkswagen crawls like a bug, some analysts complain.

Kim Girard
Kim Girard has written about business and technology for more than a decade, as an editor at CNET News.com, senior writer at Business 2.0 magazine and online writer at Red Herring. As a freelancer, she's written for publications including Fast Company, CIO and Berkeley's Haas School of Business. She also assisted Business Week's Peter Burrows with his 2003 book Backfire, which covered the travails of controversial Hewlett-Packard CEO Carly Fiorina. An avid cook, she's blogged about the joy of cheap wine and thinks about food most days in ways some find obsessive.
Kim Girard
4 min read
Volkswagen may have the hippest cars on the market, but analysts say the automaker's Internet strategy is no trendsetter.

"It's amazing that VW isn't a leader online when you consider that they're sitting on one of the most Internet friendly brands in existence--the VW bug," said James McQuivey, an analyst at Forrester Research. "If there's any car that should be sold online it's the Bug."

But VW executives--along with other auto makers including Mercedes Benz, BMW, and Chrysler--haven't yet committed the resources to match the online selling ventures of Ford and General Motors, which recently unveiled GM BuyPower. Like most automakers, VW's online strategy, for now, is mainly limited to marketing.

VW of America launched its Web site in September 1997 with the standard dealer locator, "configurators" for pricing of options, and technical specifications. Last year, the company did a Webcast when it announced the new Beetle, but stopped short of online sales.

"We would like to look at GM BuyPower and see how it develops and we might look at it in the future," said Steve Keys, director of corporate communications for ="http: www.vw.com="" "="">Volkswagen of America. "It depends on the dollars available."

"[Selling online] is more a concern for dealers, but ultimately, most people still go to the dealer to purchase their car," he added.

Meanwhile, GM and Ford are stepping up to compete against a flurry of new online auto dealer referral services including Autobytel.com, Microsoft's CarPoint, AutoWeb.com, and CarsDirect.com, an online venture backed by Dell Computer founder Michael Dell.

Using GM BuyPower, consumers may grab details about every GM make and model, independent, third-party price comparisons, vehicle inventory, GMAC financing, and the ability to talk electronically to dealers of their choice.

To date, about 75 percent of GM's 7,800 dealers nationwide have enrolled in BuyPower, in which consumers head to their local outlet to sign papers and pick up the car.

GM's move comes at a time when demand to find the perfect vehicle online is growing rapidly. Jupiter Communications predicts that the number of vehicles sold following online purchasing requests will grow from 823,000 in 1998 to an expected 2.3 million in 2002.

By 2003, nearly 8 million new car purchases will be influenced by the Net, according to Forrester Research.

Analysts said the effort pushes GM ahead of Ford, and far beyond VW, which is cracking down on its dealers use of the Web as a sales channel in the UK. A separate division of the German corporation than in the United States, VW UK went so far this week as to ban their dealers from selling online through company's such as Autobytel UK, warning in a sharply worded letter that those who did so could risk losing their livelihood.

"These businesses may well offer retailers a tempting source of additional business," the letter stated. "But you should be quite clear that if you deal with them on such a basis you are in serious breach of your dealer agreement and risk the loss of your franchise."

VW in the United States has done nothing similar here. But McQuivey noted that laws that regulate fair competition among auto dealers may impact Web-based selling. In some areas, dealers are not allowed to compete for sales in rival geographic territory, lines that are obviously crossed when business is done online.

Despite the impressions of Saturn car commercials and the GM BuyPower program, franchise laws in most states bar manufacturers from selling direct to consumers, said Chris Denove, director of consulting operations for J.D. Power and Associates.

"GM Buy Power is Autobytel run by a manufacturer," he said. "Saturn has created a perception among many people that you can buy a car directly from Saturn. That is an absolute falsehood."

Autobytel UK's chief executive Kevin Turnbull said the company is now working with many auto dealers in the UK, but has met particular resistance from VW, Europe's biggest car maker. Autobytel collects 1,000 pounds per month from dealers who list on the site.

"[VW] is the only manufacturer who seems to not accept the fact that consumers want e-commerce and they want to use the Internet," Turnbull said. "They're trying to stick a finger in the dike and say 'No, this is not going to happen."

"They've not got it," he added. "They're not in tune with this customer-driven process called the Internet."

Overall, McQuivey said, the auto manufacturers are not an e-commerce savvy, lot.

"Most of their chairmen have never used a mouse before," he said, noting VW UK's stance on the issue is not surprising.

Critics say that VW UK is afraid that online brokers will sell VWs at a discount. But in a statement released yesterday, VW executives claimed that the move was about protecting consumers, not preventing discounts.

"Effectively, commissioned selling agents using the Internet or any other media are placing themselves between the customers and retailers and are charging a fee for their service," the statement said. "Ultimately, this must lead to increases in price for the consumer and lower levels of service."

VW in the UK is taking a chance by not allowing dealers to use services like Autobytel, as many consumers now want to buy that way, said J.D. Power's Denove. "If they can't buy a VW that way, they may choose to buy another car, for that reason and that reason alone," he said.

Mark Lorimer, Autobytel's chief executive, thinks Europeans are only now going through the Internet growing pains experienced in the United States two years ago.

"The terrestrial businesses are struggling with the fact that the Internet is catching on," he said. "Some people who have vested interests are not responding to consumers fast enough."