GM: Are eBay and a $4,000 Car Enough to Turn Things Around?

Not long ago, many people wanted to leave GM on the rusty scrap heap of history. They wrote the company off as a health care provider who happened to make cars, too behind the times and inflexible to keep up with global demand for more efficient cars or cope with America’s plummeting sales figures on their profitable SUVs. But recently, GM announced two new strategies, which if executed properly (and profitably), could mark a turning point for the auto maker; selling cars on eBay (EBAY) and plans for a $4,000 car.

Last week, GM began selling new cars on eBay through their own branded eBay portal. While the auto OEMs have long used auctions to get better value from their suppliers, they’ve never taken the plunge when it comes to new cars. And while used car auctions (live and over eBay) are a staple for dealers, car flippers and used car buyers, now new car customers can get in on the action … and savings.

From a spend management perspective, there is a lot to like about this new sales and marketing tactic. The move away from traditional, expensive advertising and incentive programs in favor of Web 2.0 3.0 platforms enables customers to browse and share increasingly favorable reviews of their cars at a potentially low cost. Embracing a new paradigm that relies on word of mouth-marketing and trusted recommendations by peers rather than escalating ad wars is a promising step in the right direction, if it works. If they can master this new marketing world and leverage sales channels like eBay, they’ll be the first auto company to truly embrace the long tail of the internet.

Beyond this new sales and marketing model, GM announced plans to produce a $4,000 car for developing markets like China and Brazil (their 2nd and 3rd largest existing markets). GM’s new EVP of International Operations, Nick Reilly, announced their intentions in Brazil last Friday in a move that everyone sees as a shot across the bow of Tata Motors (TTM) and their $3,000 Tata Nano. Little is known about GM’s plans - other than that it will likely be built in Asia and may utilize a partnership with another company. But it seems entirely logical that GM will emulate some of Tata’s approach to cost cutting, perhaps even their approach to supplier driven product innovation.

Interesting moves. Everyone will certainly be watching the execution and results.

Disclosure: No positions

Comments

[Jeff B.:]

1.GM (and now taxpayers too) can not afford to repackage the same old mediocre product and figure out new ways to peddle it. This is not going to fool anyone into buying a GM vehicle who otherwise would not do so.
2. Newsflash! GM already makes a $4000 vehicle! It's called the Chevy Cobalt. The problem is that it sells for around $14,000. But the resale value is so bad that before you know it, your new car is worth less than half of what you paid for it.

Aug 19 08:56 AM

[jay dee:]

Justin you should shop for a wife online ; pick one that gets increasingly good reviews !!

Aug 19 11:22 AM

[Patricia013:]

Will somebody please explain to me what Ebay is going to do for GM? Seems to me like the desperate leading the desperate! If GM wants to get a foothold back into the business of selling autos they have to look at the "Big Three" who are NOW Toyota, Honda and Nissan! If they can't get their product up to those levels then they best quit the business and stop fooling around with gimmicks like Ebay! Just like Ebay - GM's miracle days when money just rolled in the door are OVER! Now they both better hunker down and think about pleasing their customers (oh...and for Ebay that means their SELLERS. A fact they forgot when Mr. Donahoe took over and began running the business into the ground!)

Aug 19 01:00 PM

[Glenn Mercer:]

Note that the GM cars on eBay are NOT actually auctioned. One can buy a car at the advertised price or submit an offer to a dealer. The dealer can accept that or not. Does not sound like an auction to me (where, once reserve is cleared, the seller "must" accept the highest offer, and where bidders can typically see what the current bid is). To me this looks more like "GM is now listing inventory on eBay as well as on its own dealers' websites," not actually moving to a new sales process.

Aug 19 01:22 PM

[fatseal:]

I'm not buying a government motors car. Ever. And I'm sure as heck not buying it on ebay!

Aug 19 02:12 PM

[George L.:]

GM can learn from Ford. Why Ford is making it well and not GM?

Aug 19 04:18 PM

[Justin Fogarty:]

"GM already makes a $4000 vehicle! It's called the Chevy Cobalt. The problem is that it sells for around $14,000."

That might be my favorite comment anyone has ever left on anything I've written. Bravo sir.


On Aug 19 08:56 AM Jeff B. wrote:

> 1.GM (and now taxpayers too) can not afford to repackage the same
> old mediocre product and figure out new ways to peddle it. This is
> not going to fool anyone into buying a GM vehicle who otherwise would
> not do so.
> 2. Newsflash! GM already makes a $4000 vehicle! It's called the Chevy
> Cobalt. The problem is that it sells for around $14,000. But the
> resale value is so bad that before you know it, your new car is worth
> less than half of what you paid for it.

Aug 20 12:31 AM

[Justin Fogarty:]

You're right, it's not a typical eBay style auction. But think of it as a form of online haggling over car prices ... only the "long tail" of the internet brings the dealer a much larger pool of potential buyers at an extremely low cost. It's not a replacement for the car lot, but the margins could be pretty good.

And perhaps more importantly, if customers feel they are getting a good deal, they'll tell other customers about it (via everything from Facebook to water-cooler talk). Now ask yourself, if a friend/coworker tells you he got a good deal when he physically went to a car dealership, would you go? I might if I was REALLY looking and had done my homework (since I, like most people, do not enjoy going to a car dealership). But if that same friend told me they got a good deal on a car through eBay, the likelihood of me going to eBay to browse around myself is pretty high. The experience (eBay) is familiar, trusted and comfortable.

I'm not saying this approach will necessarily make or break GM. But it's an interesting new way to drive value (customer and dealer) and lower marketing costs. It's definitely worth watching, probably worth commending and maybe...possibly...worth buying?


On Aug 19 01:22 PM Glenn Mercer wrote:

> Note that the GM cars on eBay are NOT actually auctioned. One can
> buy a car at the advertised price or submit an offer to a dealer.
> The dealer can accept that or not. Does not sound like an auction
> to me (where, once reserve is cleared, the seller "must" accept the
> highest offer, and where bidders can typically see what the current
> bid is). To me this looks more like "GM is now listing inventory
> on eBay as well as on its own dealers' websites," not actually moving
> to a new sales process.

Aug 20 12:44 AM

[Patricia013:]

Mr. Fogarty - you're forgetting one all-important fact in this mix. Ebay's reputation is badly tarnished. Buyers don't trust them and sellers don't trust them. If anything, rolling new GM cars out on Ebay's platform only cheapens the whole thing. I know if I want to buy a car I go straight to the dealer and then to another dealer and perhaps another and begin actually pitting one's "best price" against the other. Its the way I've bought my cars for almost 50 years now ;-)

Aug 20 03:18 PM

[Justin Fogarty:]

Very valid point about reputations, Patricia. But let's not confuse eBay's reputation as a platform (which I would argue is still quite good) vs the actual seller's reputations (which many, MANY people have had problems with). Assuming buyers trust car dealership's reputations, which are readily available online through Yelp, eBay or other sources, AND assuming the new cars can be "trusted" in the sense that you get the car you bid for, where's the breakdown caused by reputation? I guess I just don't see it.

Again, I don't want to get too far ahead of myself that this plan will save GM. Only time will tell if it's a success. But compared to their previous sales tactics of offering expensive (to them) incentive packages, eBay seems to be a step in the right direction.


On Aug 20 03:18 PM Patricia013 wrote:

> Mr. Fogarty - you're forgetting one all-important fact in this mix.
> Ebay's reputation is badly tarnished. Buyers don't trust them and
> sellers don't trust them. If anything, rolling new GM cars out on
> Ebay's platform only cheapens the whole thing. I know if I want
> to buy a car I go straight to the dealer and then to another dealer
> and perhaps another and begin actually pitting one's "best price"
> against the other. Its the way I've bought my cars for almost 50
> years now ;-)

Aug 20 05:18 PM

[Patricia013:]

Mr. Fogarty - this may enlighten you a bit.

money.cnn.com/news/new...

Its about what I expected, especially since they are trying to push these cars at a price 2 percent higher then in the showrooms. Ebay has to be fed ;-) People are looking....but not buying. I sold on ebay for 11 years and I wouldn't buy a car online thru them even for 10 percent LESS!

Aug 20 07:24 PM

[Patricia013:]

I guess Mr. Fogarty has no answer to my last post. I rest my case...

Aug 22 11:53 AM