Carsales.com launches new digital platform to drive online sales

Carsales.com has reported its highest profit growth since 2014 while launching a new platform designed to compete with “digital dealers” emerging overseas.

Carsales.com chief executive Cameron McIntyre expects the further digitisation of automotive retailing to create new opportunities for the company. Picture: Stuart McEvoy/The Australian.

Carsales.com has launched a new digital offering aimed at driving more of the car buying process online while reporting record web traffic and its highest profit growth since 2014.

The online automotive marketplace group has navigated challenging trading conditions caused by a global disruption in vehicle production to book a 9 per cent increase in net profit to $131m.

Revenue was up 8 per cent on the previous year, to $427m, with the company’s international business reporting the strongest growth. South Korea delivered revenue growth of 21 per cent, while in Brazil revenue was 16 per cent higher than the previous year.

Australian revenue grew by a modest 2 per cent due to production constraints limiting the supply of new cars.

However the challenges are being offset by a boom in used car sales, with Australians paying nearly 50 per cent more for used cars than before the pandemic.

Used car prices are around 60 per cent higher than the April 2020 low, according to Moody’s Analytics’ used car price index, as cashed-up Australians choose to spend more of their money closer to home.

Carsales.com chief executive Cameron McIntyre said the company had responded to the accelerated demand for an entirely digital car buying experience with the launch of new digital offering Carsales Select.

Launched last week, the platform introduces new features including pre-negotiated pricing, inspection reports and money back guarantees, which are aimed at boosting the number of deals done completely online.

Mr McIntyre said trade-in, finance and home delivery offerings were part of a longer-term plan for the platform, as part of a strategy aimed at competing with “digital dealers” emerging in Europe and the US.

“With groups like Carvana, we’re thinking that sort of model will at some stage come to Australia and we need to make sure our dealer network is prepared for that,” he said.

“What we’re trying to do is support our dealer customers in being able to trade through current and future pandemics, but we’re also trying to provide solutions where they can become more efficient.

“Sales per salesperson, trying to improve ratios there, and reduced cost inside the dealership while making it more convenient for customers to transact. We know what consumers are looking for when it comes to being prepared to transact online - things around price certainty, quality of the car, finance and delivery.”

Carsales.com is also testing a new ‘dynamic pricing’ system designed to tailor fees according to the services being delivered.

Ultimately, the aim is to be able to adjust fees according to the location of the seller, type of car, demand for the car and time of year. Location testing is currently under way in Western Australia.

“What we want to create is the capability for us to tailor the experience for the seller, which generates the right outcome for them and also helps us in terms of developing yield and also developing growth in terms of volume in particular markets,” Mr McIntyre said.

“There might be some markets we’re weaker in, and with dynamic pricing it gives us an ability to challenge more in those markets.”

Despite the improved result, Carsales.com cut its final dividend by 10 per cent to 22.5c per share, following an interim payout of 25c earlier this year.

Mr McIntyre described the recently announced minority acquisition of Trader Interactive - a specialty online automotive marketplace in the US - as “transformational”, offering Carsales.com exposure to “large and attractive addressable markets in the United States”.

The company expects to deliver “solid growth” in adjusted revenue, EBITDA and NPAT in 2021-2022, with performance skewed to the second half depending on the duration and frequency of Covid-19 lockdowns.

RBC described the company’s full-year performance as a “healthy result”.

“With private (sales) a key profit driver for Carsales.com and FY22 focus areas looking at further enhancing this offering with dynamic pricing tools, and on the dealer side depth product enhancements and monetisation via dealer finance as Carsales.com has flagged before, we think the business is heading into FY22 in good shape.”

Mr McIntyre said that outside of lockdowns, the company encouraged its staff to work three days from the office, and it was likely a similar policy would remain in place as the effects of the pandemic ease.

“It is more challenging keeping people engaged - things like Zoom and Slack and other things become very important,” he said.

“We just need to keep focused also on the culture of the business, making sure people have the opportunity to engage and learn in different ways.

“There are some things that can’t be replaced by Zoom calls - in terms of culture, for us it’s about finding a balance.”

When it comes to vaccinations, Carsales.com is leaving it to staff to make their own decisions.

“We leave that up to the government to provide the guidance and support around that,” Mr McIntyre said.

“We don’t want to endure these lockdowns and I guess the fastest path to stopping these lockdowns is vaccinations, so from that point of view as an organisation we support vaccinations.”