Daewoo Motor America said Monday that it plans to become the first auto maker to sell its cars in California direct to consumers via the Internet.
Daewoo's program marks a further erosion in the traditional method of selling cars and has heightened fears among some dealers that car makers are looking for ways to cut them out of the loop.
Under its Internet sales plan, which the Compton-based importer hopes to have up and running by the end of the year, a customer will be able to shop for a car, arrange for one to be brought to their home or office for a test drive, select colors and options, apply for financing, use a credit card to make a down payment and take delivery--all without ever seeing a Daewoo dealership.
Daewoo claims it can sell its cars for less, or offer more amenities than competitors, because it eliminates dealer profits.
But the company's Internet plan is not likely to undo the auto industry's dealership system any time soon.
California law still prohibits car makers from making end-runs around their independent dealers by selling directly, said Tom Novi, chief of occupational licensing for the state Department of Motor Vehicles.
Thousands of cars are already being sold through independent electronic marketing services such as Autobytel.com, factory-sponsored Internet sales programs such as GM BuyPower, and individual dealers' own Web sites. But in each case, the deal has to be completed by a franchised dealer.
Daewoo is a special case because the upstart South Korean company is the only car maker in the state that owns all of its own sales outlets. It can't steal customers from its dealers because the factory is the dealer.
"It would take a major restructuring for others to emulate the Daewoo model," Novi said. "But this is the beginning. The way all vehicles are sold is going to change dramatically in the next 10 years."
The old rule that a car dealer's clientele comes from within a 10-to-15-mile radius of the dealership "is going to be out the window" as electronic commerce erases boundaries and speeds up delivery of cars that could be held at central, factory-owned distribution centers, Novi said.
But now the Internet "is just being used to shuttle people into the dealerships," said Christoph Nagle, Daewoo's Internet marketing manager. "We are in a position where we can be the first to sell directly."
Most car dealers in the state aren't yet aware of Daewoo's Internet sales proposal, Novi said, "but I'll be getting hundreds of requests for information as soon as the word goes out." He said he expects the first deluge to come when he appears at the National Automobile Dealers Assn.'s convention in San Francisco next week. The weeklong event begins Saturday.
"It's a huge red flag," said Marc Spizzirri, owner of Family Automotive Group, with a Toyota dealership in San Juan Capistrano and Ford franchises in Montebello and Whittier. "As a dealer, I'm offended by these efforts to go around us."
Ford Motor Co. and General Motors Corp. are already consolidating dealerships in some markets, bringing them under company ownership when possible. "The next step is to figure out how to go around the independent dealer altogether," Spizzirri said.
Nagle sees it from a different angle. "It's not like dealers haven't seen this coming," he said of car makers' efforts to take control of their sales networks. "It is dealers, not the corporations, who created the negative image most people have of the buying experience. And that's what the corporations are trying to reverse."
Daewoo is new and such a small player--it began selling in the U.S. in September and averaged just 600 sales a month nationwide in its first four months--that its program isn't something other dealers have to worry about immediately, said John Rettie, West Coast correspondent for Ward's Dealer Business magazine.
"But this is the start of something new," he said. "And while there is no way to predict how soon it will make major changes, in two years or 20, it will make major changes."