By on September 19, 2019

Full disclosure time: For those who are new around here, I worked at Cox Automotive for a little over four years as a sales trainer in the Media Sales division. In that role, I was (very) peripherally aware of some of the company’s strategic decisions, as the Sales Strategy team was also part of my larger department, but I didn’t have any influence or advance knowledge of them. (This is a boilerplate statement for when my old friends at Cox decide I’m in violation of my employment termination agreement by writing this.)

When I first started at Cox (before they even called it “Cox Automotive,” it was just Autotrader.com then), the company was a fat cat, to say the least. I remember when one of our leadership team members declared that we had sold $1.2 billion of revenue in a year, and that over $700 million of it was pure profit. I remember when we drastically overpaid for Dealer.com and Dealertrack at a whopping $4 billion dollar pricetag, just because we had the cash laying around and we were going to get heavily taxed on it if we didn’t spend it on something.

Of course, everything has an expiration date, and the third-party automotive classified business was no exception. Around 2016 or so, consumers started using this new thing called “Google” to search for cars on the internet, dealers stopped writing five-figure checks for classified ads every month without even asking why, and sales reps learned that they aren’t actually worth $250,000 a year for just “checking in” on dealers. Their  strategy of diversification, with the purchases of companies like Kelley Blue Book, vAuto, and VinSolutions turned out to have been a smart move, as some of their competitors like Cars.com were stuck holding the note on a company that literally nobody wants. Ouch.

So when I read that Cox Automotive had invested $350 million into Rivian last week, my initial thoughts were, “Oh, there goes Cox burning some more cash,” and I mostly went about my day. However, a week later, I’m beginning to see that there are more wheels in motion than anybody on the outside realizes — and they will have a significant impact on the automotive marketplace in the years to come.

Before I dive in, It’s important to understand the typical dealer’s opinion of the 800-pound gorilla that is Cox Automotive. Many, if not most, dealers genuinely dislike dealing with Cox, but they feel that they don’t have any choice. Dealer.com is one of the four approved vendors for websites with both General Motors and Ford, and one of the few approved CDJR solutions for co-op SEM approval. vAuto is the only pricing software that most serious dealers even consider using. Manheim owns and operates the majority of the auctions in the country. And while Autotrader doesn’t work like it used to, most dealers are still afraid to cut off that lead source (yes, you are too a lead source, Autotrader) entirely. Working with any of these companies involves stroking a hefty check to the not-so-jolly giant in Atlanta that is Cox Automotive.

As a result, dealers have a million conspiracy theories about the algorithms on Autotrader and Kelley Blue Book when it comes to displaying inventory. Autotrader used to default to a “price high-low” result on any inventory search, but cars are now sorted by “relevance.” Despite many reassurances to the contrary, dealers insist that there is a way to buy your way to the top of the relevancy search. (You can buy a spotlight ad, which are less obviously “paid ads” than they used to be.) I have heard dealers say that Autotrader gives favorable placement to certain OEMs because they spend more on advertising, etc.

By aligning themselves with Rivian specifically (and Ford tangentially, thanks to Ford’s huge investment in Rivian), Cox is opening themselves up to all sorts of accusations of unfair placement and preferential treatment — not only on the Autotrader  and Kelley Blue Book classifieds, but perhaps in vAuto pricing suggestions, KBB valuations…the list goes on forever in the ways that Cox, as a parent company, can and perhaps even does manipulate the automotive retail space.

So what does that mean? To this industry analyst’s eyes and ears, it means that they’ve seen the future, and that it ain’t in listing cars in classified ads. Sure, that’s how they make a good portion of their money now, but that market is forever shrinking and shrinking as SEM and display advertising continues to make up more and more of any dealer’s digital advertising budget.

Pay specific attention to this quote from Automotive News piece, as well.

Rivian and Cox Automotive also said they will explore “partnership opportunities in service operations, logistics and digital retailing.”

To me, this means that Cox is interested in managing and operating a rental fleet for Rivian with their newly acquired company, Pivet. It could also meant that they’re interested in selling subscriptions through their subsidiary, Clutch. What it also definitely means is that they’re not focused on selling Rivian vehicles on Autotrader.com — at least not in any volume. It means that they’re willing to damage their currently agnostic position in the marketplace to take the risk on Rivian being something really, really big.

For all of its flaws, Cox Automotive doesn’t often guess wrong (MakeMyDeal, anyone?). They typically buy the best company in any space and invest heavily in it, with both capital and people. But the $350M? That’s not the investment risk here — that’s frankly about 4-5 months of profit for the Automotive division, and even less of Cox Enterprises’ profit, as a whole. The risk is the potential perceived hit to their other brands. So for them to be taking this risk means that they believe in Rivian in a big, big way.

And if they do, maybe we should, too.

[Image: Rivian]

Get the latest TTAC e-Newsletter!

Recommended

26 Comments on “Bark’s Bites: Cox Automotive’s Investment In Rivian Speaks Volumes About The Future...”


  • avatar
    FreedMike

    So, does anyone know what Rivian’s sales model is going to look like?

    If all of Bark’s predictions prove accurate, then maybe they’re going to be selling subscriptions, versus selling to dealers (or through their own dealers).

    Interesting stuff.

    • 0 avatar
      EquipmentJunkie

      According to a CNBC report today, the sales model of Rivian begins with selling 100K units to its own investor Amazon.

    • 0 avatar
      EquipmentJunkie

      I agree that it will be interesting to see what the logistics of the Amazon van sales will look like. On paper, both Cox and Ford have incentives to market Rivian products through existing automotive distribution channels. Has 20 years of online purchasing by consumers, the Tesla sales & delivery model, and the new EV charging infrastructure been enough to create a sales/distribution reset? We shall see. My gut reaction is that it has.

      Rivian sure does appear to be the real deal for an EV. They continue to impress me with the direction that they are heading.

      • 0 avatar
        FreedMike

        Seems both Rivian and Ford are betting on commercial trucks, and that makes sense. I’m no expert on commercial vehicles, but I think this application may be the EV’s killer app when all’s said and done. If range is a problem, then put in a bigger battery – and then put the bigger battery in a bigger vehicle. Problem solved.

        • 0 avatar
          JimZ

          ladder-framed trucks have plenty of room in the undercarriage for battery. especially if the motors are located at the axle(s.) then you get rid of transmissions, driveshafts, fuel tanks, etc.

  • avatar
    6250Claimer

    IIRC this is the same Cox family that owns Cox Communications, aka Cox Cable.. yes?

  • avatar
    Lokki

    Investing in Rivian is a Hedge Bet. European governments individually and the E.U. collectively along with the Chinese are pushing electric vehicles very heavily. Apparently Rivian has some potentially very good underlying technology -which gives an alternative to hooking one’s wagon, Er, electric scooter to the (shooting?) star of the moment,Tesla.

    There is a strong chance that if the Democrats retake the White House in 2020 there will be a similar governmental push to electrics in the U.S.

    It’s just good business to go there.

    As a side note – Rivian’s electric pickup truck is not necessarily a serious product proposal; it’s most likely to have been designed as a marketing ploy as a way to cut through the news cycle clutter. Dozens of small companies announce electric CARS every year…. but a pickup truck? That’s NEWS!

  • avatar
    ajla

    So who over at Cox is responsible for making Doug DeMuro a Youtube superstar?

    • 0 avatar

      I’ll just say that it didn’t happen until I left :)

      • 0 avatar
        FreedMike

        Apparently YouTube users like repetitive, annoying car reviews that don’t say much about how a car drives.

        On the other hand, “Regular Car Reviews” is a hoot. I’d like to know that that guy’s monthly peyote budget is.

        Oh, and BTSR is still out there. Not missing him around here one bit.

        • 0 avatar
          ajla

          IMO, DDM is terrible at making videos but somehow he gets amazing access to unique and rare vehicles. I don’t know if this is because of his own charisma or if Cox/Youtube is greasing the skids for him.

          He’s definitely a heavily promoted Youtube partner, which I’m guessing was fully Cox’s doing.

          • 0 avatar
            JMII

            Doug has unique take on things and covers odd ball stuff most people ignore plus these random and rare vehicles. I find him entertaining and so does my wife. His takes are downright silly at times and there is clearly a tie-in with him shamlessly promoting Autotrader. I just don’t get the hate on him. I don’t buy my cars based on his Doug score or any other YT review, magazine article or website including this very one.

          • 0 avatar
            ajla

            “I just don’t get the hate on him.”

            I don’t find him entertaining at all so that is where the disconnect would be.
            It wouldn’t be a issue if YT didn’t so heavily promote his stuff and unsquelch his channel.

          • 0 avatar
            FreedMike

            I think DeMuro was always a bit annoying, but that didn’t matter for me with his earlier reviews (the Carmax Land Rover videos were great). It worked. Now it’s the same “format” for every review (first, plug the dealer that provided the car, then spend 10 minutes on every switch on the dash, five minutes on what the center screen does, and two driving the car…blah).

            If you ask me, the best Youtube car personality is definitely Jay Leno. No one gets access to cooler stuff than Leno. I mean, the man owns a freakin’ **********Chrysler Turbine**********, and spent precisely zero minutes on its’ quirks and features.

          • 0 avatar
            JimZ

            “If you ask me, the best Youtube car personality is definitely Jay Leno. No one gets access to cooler stuff than Leno. I mean, the man owns a freakin’ **********Chrysler Turbine**********, and spent precisely zero minutes on its’ quirks and features.”

            more importantly, he actually DRIVES them.

          • 0 avatar
            ToddAtlasF1

            I don’t hate DDM, but I’ve expended whatever interest I had in seeing his videos quite some time ago and after seeing very few videos. I fully agree that Jay Leno’s Garage is excellent. There are plenty of really rich guys hoarding warehouses full of interesting or significant cars, but only Jay Leno share them with the great unwashed and has the personality to not start a class war in the process.

  • avatar
    cimarron typeR

    Who’s the out of work sportscaster who does the off road tests on crossovers? I remember his camera fell into a mudpit when he was reviewing a CRV,Outlander or something. I thought he was gonna cry. Made me sad for him so I clicked on 2 more of his reviews.

    • 0 avatar
      PrincipalDan

      Oh shoot I’m trying to think…

      EVERYMAN DRIVER!

      I always laugh when he does something like take a CX-9 off roading.

      Seems like the kind of guy whose wife is happy that the car reviews get him out of the house.

  • avatar
    Glenn Mercer

    I wouldn’t say Manheim has the majority of auctions. Last I saw their market share was about 40% or so and Adesa about 25% or so. The largest player, no doubt, but I’ve never seen data showing them with over 50%. KAR/Adesa has even said that they are bigger than Manheim, but I am guessing (that is a GUESS) they are including salvage in that, not just whole-car.

  • avatar
    Lorenzo

    Every time I see the name Rivian, I’m reminded of the movie where Leo DiCaprio gets raped by a bear. They should have come up with a better name.

  • avatar
    87 Morgan

    The NADA convention is basically a Cox Automotive display these days. If they decide, like JM&A did last year, the entry fee and cost is not worth the results NADA could have a real problem on their hands.

    At some point, Cox has to get into the retail end of the automotive market. They control so much of the flow of data already, how hard would it be to channel that flow to their own stores?

  • avatar
    Extra Credit

    EVs are being designed to enable the OEMs to convert their sales model from single event sales/service to subscription service(s). Even if customers choose to buy an EV, many optional features (including charging) will be available through subscriptions. It appears that Cox has figured this out and is keen to apply their connected everywhere experience to be the subscription delivery service to a market newcomer.

  • avatar
    ToolGuy

    If you ever get the opportunity to visit a Manheim auction in progress, take it. (Also ask for a quick walk-through of their reconditioning operation.)


Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • ToolGuy: If you ever get the opportunity to visit a Manheim auction in progress, take it. (Also ask for a quick...
  • sgeffe: I’ve had XPel Ultimate PPF professionally installed on my last two cars, and it’s worth the expense. On my...
  • Rnaboz: I did half hood, front bumper, headlights,mirror caps, and top of rear bumper (where things get dinged taking...
  • ToolGuy: Degrees of ugly: – Brushed against an Ugly Twig – Hit with the Ugly Stick – Bumped into...
  • Featherston: +1 – I lived in the UK for two years for work. If “I want to try something not available in...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States
  • Moderators

  • Adam Tonge, United States
  • Corey Lewis, United States