The repayment of the investment that dealers made in the online initiative follows the purchase earlier this year of Cox Automotive Australia’s web media properties, CarsGuide and Autotrader, by eBay; reputed to be for $90 million.
The move of CarsGuide out of CAA, and the receipt of funds from eBay for the sale, prompted discussion about the relevance of DealerMotive remaining a shareholder in CAA, resulting in the parties setting about negotiating the exit of DealerMotive.
Dealer shareholders via DealerMotive had invested about $39 million in the enterprise over the full course of the initiative and will now, as a result of the move of their online assets over to eBay, will receive a payment of $1.25 for each dollar they spent.
The payment will be very timely and welcomed by participating dealers weathering the effects of the pandemic and will be worth many millions of dollars for Eagers Automotive whose share included that of AHG which it absorbed last year. Eagers and AHG were the biggest dealer investors in the enterprise.
The payment for the purchase from eBay was made to Cox Automotive Australia (CAA) about a month ago and the capital distribution to dealer shareholders has now commenced.
The dealers owned 30 per cent of CAA via their investment vehicle DealerMotive. Under the new arrangements and following the payout, the dealers will exit from the 30 per cent shareholding in Cox Automotive Australia while Cox operations in Australia will revert to 100 per cent ownership by Cox Automotive USA.
The sale of CarsGuide (and Autotrader) by Cox Automotive Australia to eBay meant that the online auto property has found a new home for the third time in as many years.
The online project, in which dealers invested with the prime motive of bringing price and online services competition to the then totally-dominant online classified player, Carsales, first wound up in bed with News Corp.
At that time a large number of dealers and dealer groups operating under the business name of OneWayTraffic paid $15 million to acquire a half share of what was then News Corp’s motoring website CarsGuide.
News Corp for its part tipped in $15 million in advertising and promotional exposure for the CarsGuide website.
But it was not a happy marriage with News thinking the dealers should have advertised exclusively with CarsGuide, which they could not possibly do because of the volume of used-car leads emanating from Carsales, and the dealers not sure that the contra advertising was doing the trick on driving traffic.
By 2016, News had lost its enthusiasm for online cars and the dealers were casting around for a new partner which turned out to be Cox Automotive.
News and OneWayTraffic agreed to go their own way and the dealers stumped up another $20 million to buy out News Corp’s share of CarsGuide.
By then the dealers, in their pursuit of applying the blowtorch of competition to Carsales, had spent, including a few calls along the way, around $39 million.
The dealers rolled their interests over into a new entity, DealerMotive, which was a consortium of 60 dealer groups representing around 600 dealerships selling across every new-car brand in the country accounting for approximately one third of total new-vehicle sales volume at the time.
DealerMotive then rolled CarsGuide into the newly-formed Cox Automotive Australia with the dealers holding 30 per cent of the new company and 70 per cent held by Cox in the US. The deal at the time valued the entire Cox business in Australia at around $133 million.
CarsGuide joined existing Cox Automotive brands and, along with Autotrader, joins Gumtree under the eBay umbrella.
DealerMotive chairman Martin Ward said in a statement: “From the outset of the joint venture, one of the primary objectives of our dealer investors was to create stronger competition for the provision of dealer services, in order to give dealers more choice in the marketplace and better value for their money.
“With the launch of several new brands and especially Autotrader, our investors can be proud of the role they played in helping reshape the competitive landscape for automotive services for franchised dealers.
“With the sale of CarsGuide and Autotrader along with it, we felt it was the right time to bring the joint venture to an end.”
“On behalf of DealerMotive, I’d like to thank Cox Automotive both here in Australia and the US, for their support and for fostering a genuine partnership with our dealer investors.
“Cox Automotive remains committed as ever to supporting dealers in Australia and we look forward to maintaining a close and mutually beneficial partnership.”
Cox Automotive Australia CEO Rob Whiten said: “We will always be extremely grateful for the invaluable support, experience and expertise that our partners from DealerMotive injected into our joint venture business.
“Working closely with DealerMotive we have benefited from their strategic customer insights and market knowledge, helping to grow Cox Automotive Australia over the past few years and positioning the company for future success.
“We look forward to maintaining a close working relationship with the dealer investors who in many cases are also valued customers. Our aim is to continue to be a strong partner of the automotive industry, offering a suite of connected automotive products and services which ensure a competitive marketplace and importantly, assist dealers in running their businesses more profitably and efficiently.”
Cox said that with the sale of the Autotrader and CarsGuide brands, its focus would be on “executing a broader strategy of building upon strengths in the wholesale arena and supporting dealers, OEMs, insurers, financiers, fleet/lease and rental companies with a connected retail proposition which is becoming even more important in light of Covid-19”.
“Especially in the current environment, Cox Automotive is strengthening our focus on digitising the wholesale and retail automotive experience, to provide our customers the tools they need to keep their businesses moving forward in rapidly changing markets.
“This further investment by Cox Automotive USA is a clear sign of their confidence in our strategic direction and in the Australian and New Zealand markets.”
By John Mellor