Is eBay Increasing Focus on eBay Motors ?

March 30th, 2016 by Trefis Team
-4.86%
Downside
51.34
Market
48.85
Trefis
EBAY: eBay logo
EBAY
eBay

Recently,  eBay (NASDAQ:EBAY) announced that it had acquired Cargigi Inc. a provider of online advertising and marketing services for the auto industry. Cargigi will replace eBay’s Dealer Center and the company will leverage its technology to help manage auto dealers’ inventory on the vehicles and auto parts segment of its marketplace. In the past few years eBay Motors has been adversely impacted by competitors such as Craigslist, which have entered the automotive marketplace and taken a slice of eBay’s market share. According to analyst estimates, sales of cars and auto parts on eBay Motors dropped by nearly 30% in the last five years. Through the acquisition of Cargigi, eBay is looking at technology innovations to grow its auto business. The company believes that, through Cargigi’s technology, its eBay Motors dealers will be able to grow and manage their businesses, all the while enhancing buyers’ shopping experience.

See our complete analysis for eBay

Relevant Articles
  1. Up 17% YTD, What To Expect From eBay Q1 Results?
  2. Up 19% YTD, Where Is eBay Stock Headed?
  3. Trailing The S&P By 20% This Year, Can eBay Stock Rebound?
  4. Down 4% YTD, What Should You Expect From eBay Stock?
  5. eBay Stock Is Down 7% YTD, What’s Next?
  6. What To Expect From eBay Stock?

Competition In Used Car Marketplace Intensifying

eBay Motors is losing market share to new start-ups who have entered this market recently. In 2005 eBay Motors processed $13 billion worth of vehicle and part sales. This number increased slightly to $14 billion in 2009. While the company stopped reporting numbers of this segment subsequently, Channel Advisor estimates that the total automotive merchandise sold on eBay in 2015 was around $10 billion.  With new entrants offering several other services such as inspecting the car to be sold, offering test drives and connecting buyers and sellers locally, eBay Motors suffered a decline in its total merchandize volume. The company now appears to be working on strategies to develop a competitive edge and increase its market share. Cargigi’s technology will allow eBay to build out its structured data capabilities for the vehicles industry and give dealers more access to analytics.

According to our estimates, average spend per active user on eBay’s platform will increase moderately from  $521 in 2016 to nearly $ 560 by the end of our forecast period. If the company manages to increase this average to $600 by the end of our forecast period, through a focus on high ticket items, there can be a 10% upside in our price estimate.

 eBay’s total GMV (gross merchandize volume) in the fiscal year 2015 was $82 billion, so the estimated contribution of eBay Motors is around 12% of the company’s GMV. An increase in the volume of this segment should impact eBay’s revenues positively.  The acquisition of Cargigi is an indication that eBay is trying to use technology innovations to attract more sellers to its auto marketplace. If it succeeds in this attempt, the company should see a growth in volume in the coming quarters.