Why Selling GM Cars on eBay is Good for the Auto Industry

General Motors announced it is teaming with eBay to sell cars on the online auction site. The joint venture marks the first time that eBay Motors, with 12 million monthly visitors, will sell new cars. This is a somewhat crazy idea, but mostly it's a really good one. It's high time that car companies allowed consumers to bypass dealers and buy cars online.

Not only is this a great way to necessarily cut the number of dealerships GM has to pay one month after emerging from bankruptcy, it's also a great way to feel out the natural market for car buyers. GM has reported that its show rooms have been desolate, and with 84 million global users, eBay would be a great way to expand GM's market.

Also as Steven Pearlstein explained in a Washington Post Q&A, there are a lot of advantages to an online selling model:

I don't think it necessarily has to be contrary to the interest of the local dealers. The dealers can still have showrooms so people can come in and see and test drive the cars. They can still prepare the new cars for delivery. They can still offer service contracts. And with your model, they don't have to tie up a lot of capital in inventory. Their profits on new cars has been so beaten down that at this point I'm not sure they wouldn't welcome a new business model. But you are right: when they get the new factories that can produce lots of different cars from the same line, this is the way things will go.

What could this mean for the future of car buying? The GM-eBay pairing will allow consumers to compare prices across dealerships and even indicate the price they'd be willing to pay to negotiate lower. In other words, it would function just like a dealership, except the haggling would be online and users could compare prices across dealerships. It's unclear to me, however, what role exactly a dealer has to play if the haggling takes place outside of dealership. My guess is that as GM, and other companies, continue to find ways to cut fat, they will look to move consumers online -- from the showroom to the laptop, as one put it. It's a bold, possibly overdue move, but it will be interesting to track reaction from both buyers in California, where the program is launching, and local dealers to see just how secondary their roles become.