AutoNation Inc., the nation's largest auto dealership chain, is accelerating plans to build a new digital app that would allow customers to buy a car mostly online, reported The Wall Street Journal.
The company is investing $100 million over the next two years to build the Web-based tool, which goes live later this year, and expand its digital capabilities—all with the aim of making the car-buying experience much more like purchasing an item on Amazon.com.
"You can sit at home, watch TV. You can view our entire inventory, select the vehicle you're interested in, get a price and then you can send us a deposit," said Mike Jackson, chief executive for AutoNation, following the company's release of second-quarter earnings Thursday. That vehicle then becomes the customer's car without the customer "ever having entered the store," he added.
The move comes as dealerships look for new ways to better cater to a growing clientele of Internet-savvy shoppers. Car companies, too, are also jumping into the online auto-buying fray. Last year, General Motors Co. launched a new online shopping tool for its dealers that would allow them to execute more of the car-buying process over the Web.
For AutoNation, however, being able to order a car through its website is only the start, Mr. Jackson said. Next year, the company plans to roll out several more online apps, such as a trade-in appraisal tool and service options that will expand its menu of digital services.
The digital investment follows AutoNation's relaunch last year of its car dealerships as a national "coast-to-coast" retail chain, a move aimed at boosting the company's brand recognition.
Mr. Jackson described the online car-buying app as the next logical step in this strategy, giving customers a more seamless experience between what they see online and in stores.
"We're investing in the brand, which drags customers to our site; then they can transact over the site," he said.
This latest move comes as AutoNation's reported a 12% increase in net income for the second quarter to $100 million, or 83 cents a share, a gain bolstered by a strong spring selling season and growth across all its business lines.
Second-quarter revenue climbed 8% to $4.8 billion from a year earlier.
The results fell short of analysts' estimates of 87 cents a share. Analysts and company executives attributed the miss to higher expenses linked to the accelerated pace of its digital expansion and lower-than-expected sales volumes on the used-car side.
The Fort Lauderdale, Fla. dealership chain finished off the year's first half with net income of $196 million, up from $173 million the same period a year ago.
Total retail vehicle sales rose 6% on a same-store basis and 8% overall, off brisk domestic, import and luxury-car business. Also, in the second quarter, the company acquired Roundtree Chrysler Dodge Jeep Ram, its third store in Mobile, Ala.
AutoNation, which has 273 new car franchises, has posted higher earnings over the last few years, helped along by higher used-car prices and pent-up demand from car buyers who delayed purchases during the recession.
Although a rash of winter storms in January and February hurt sales at the start of the year, the auto industry continued to gain strength into the spring and early summer as customers returned to showrooms.
AutoNation expects U.S. new-vehicle sales will continue to rise throughout the back half of the year. It forecasts industrywide U.S. sales will rise 3% to 5% this year to 16 million new-vehicle sales in 2014, up from 15.6 million in 2013.
