Volvo infotainment to gain YouTube, upgraded Google services - Autocar

Volvo infotainment to gain YouTube, upgraded Google services  Autocar

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KAR Auction Services grows online business through TradeRev

TradeRev lets dealerships sell wholesale vehicles to other dealerships in real time.

KAR Auction Services Inc. is boosting its investment in its TradeRev business as it seeks to spread the online appraisal and auction tool to as many as 100 markets across North America and eventually take it global.

Through a mobile app or a desktop tool, TradeRev lets dealerships sell wholesale vehicles to other dealerships in real time.

In the second quarter, 30,000 vehicles were sold through TradeRev, more than double the year-earlier period, KAR said this month. It's in just more than 30 markets in the U.S. and Canada. But those numbers are "a drop in the bucket" of what KAR executives think TradeRev can do.

To that end, the company is ramping up its spending on Trade-Rev in the second half of this year, adding staffers and expanding marketing and branding efforts. The number of dealers using the platform is growing, though KAR isn't disclosing how many are signed up.

"One of our biggest challenges is just hiring the people," KAR CEO Jim Hallett told Automotive News. That includes technical staff such as engineers and field reps who can train dealers. "You just can't hand the dealer the app and have them understand how to use it. You have to hold their hand for some period of time while you get them introduced. It's still very much in the early stages."

$40 million loss

TradeRev had 200 employees in North America as of last October. It is now up to about 430 with almost 150 openings to fill.

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For 2018, KAR plans a loss of $40 million before interest, taxes, depreciation and amortization from Trade- Rev, which is part of its ADESA auction unit. That's a bigger loss than initially planned because of more investment coming in the second half of the year. The company's overall 2018 spending on TradeRev is more than $40 million, though, because gross profit on the vehicles sold through TradeRev is also being reinvested in the business.

"What we want to do is double down on what's worked up till now to get to winner takes most" of this business, KAR CFO Eric Loughmiller said. "We want to be first to market; we want the most resources. But it's also because the rest of our business is doing so well, we feel we can afford to do this without affecting our results on a consolidated basis that we promised to our investors."

KAR bought 50 percent of Trade-Rev in 2014 and acquired the rest of the company last October for $50 million in cash and an additional $75 million during the next four years. That additional sum is contingent on certain terms and conditions including TradeRev's performance.

Scan, photograph, launch

Using the TradeRev app, dealership employees scan the VIN, photograph the vehicle and can launch a live one-hour auction during which other dealerships can bid on the vehicle. The tool lets dealerships sidestep traditional physical auctions, the business from which KAR derives much of its revenue.

KAR estimates that the market for dealerships wholesaling vehicles to other dealerships today accounts for 10 million to 12 million vehicles annually between the vehicles that come to auction and those that change hands privately, Hallett said. If TradeRev can win much of that business — KAR executives are hoping to win most of it — then millions of vehicles could be sold annually via the tool.

But won't that cannibalize KAR's physical auction business?

"Going into TradeRev, we felt that we would cannibalize some of our physical sales," Hallett told analysts this month. "But we haven't cannibalized them nearly to the degree that we were thinking."

Through TradeRev, the company is selling to dealers that it hadn't done business with before, he said.

A critical mass of volume for Trade-Rev is still years away. But when that happens and as the market matures, "I believe this will be a very profitable portion of our business," Loughmiller told analysts. Hallett said he expects TradeRev to start contributing profits to KAR within the next two years.

Beyond the North American expansion, KAR is evaluating Trade-Rev's potential for international markets. The company is looking for international growth opportunities separate from TradeRev and is in discussions on potential acquisitions to that end, Hallett said. TradeRev could be part of entering overseas markets.

"This technology travels everywhere in the world, it can operate in any language, it can operate in any currency," he said. "And we have big plans."

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