As digital sales begin to saturate the used car market, Cox Automotive's Manheim auction business has already launched a transformation to take it beyond physical auction sales into an array of remarketing channels.
This year alone, Manheim reinvested in its Simulcast digital auction platform; debuted its first all-digital auction in Tucson; and partnered with a computer vision company to offer dealers next-generation capabilities, including enhanced merchandising with 360-degree and 3D imaging for Manheim Express and inside-the-gate wholesale services.
In January, the Atlanta-based Cox also launched a new brand for its mobility business to provide services for various fleets, including ride-hailing users, and converted a physical auction into a mobility service hub.
Grace Huang, who serves as Manheim's inventory solutions president, has been leading this transformation. We sat down with her during a recent visit to Cox's Atlanta headquarters. Huang has been in the organization since 2007, when she joined Cox AutoTrader as a business development director. In October 2017, she began her current role.
Automotive Fleet: Could you talk about the Cox/Manheim diversification strategy as the leader of the Inventory Solutions group? How do you see the wholesale marketplace developing over the next six to 18 months?
Grace Huang: First and foremost, as we continue to evolve, we've been investing in a lot of technology tools. And today, we're getting close to 50% of our cars being sold online, which is the tipping point that we've talked about for the past 20 some years. A lot of the cars are still sitting on our lot, and we're still processing those cars. But this notion that every day cars are for sale is now truly coming alive.
From a safety perspective, we're trying to lessen the number of cars that actually run through physical lanes. When we look forward, we truly believe in a marketplace, where transactions will be made in the digital realm. So that potentially opens up a lot of physical space for us. At Manheim, we’ve got roughly 6,500 acres of land around the U.S.
This is where fleet comes in, and where we believe our future really comes in. As we have gotten more into mobility, we have had industry players come to us, whether it's in-fleeting or de-fleeting of fleets or maintaining these cars in between. We have the space, and we have the skilled capacity to help these fleet management companies really maintain the consumer mobility fleets of the future going forward.
AF: Let's hone in on that a bit more, and how you created a mobility hub at the former Atlanta Metro auction.
Huang: We retrofitted it. We put in advanced equipment so we could do more advanced diagnostics, like resetting the sensors. We put in a lot of electric chargers knowing that a lot of the fleets of the future will be more electric.
AF: Will it be mostly a resource for managing ride-hailing fleets or will be also be a resource for commercial fleets?
Huang: I think as commercial fleets transition, it could be for subscription fleets. We think of these mobility centers for cars that need that quick turn. Today, we have a lot of cars at the center that aren't necessarily being used in a mobility sense, but they have a different model. They don't sell through our lanes, but they still want the full kind of reconditioning done to it.
AF: What kinds of technology are you looking to implement?
Huang: We've made lots of investments to improve our condition reports. We're going to make a substantial investment to take our condition reports from today, where they are subjective, to using a technology that makes it objective. That's our goal, to use images and advanced artificial intelligence to do automated damage detection. That's the holy grail.
A scan of the side of a vehicle would look more like a topographical map. We're testing it out in a parking lot. The technology is getting to the point where you can see it on a white car on a sunny day.
AF: Let's talk about the digital side of the business as far as live auctions versus marketplace listings? How much is that growing?
Huang: It's all growing. We set a goal to reach 50% digital sales this year, and we've been surprised how quickly it's accelerating. We should get there in 2020.
AF: With all the vehicles being moved around at auctions, there must be some safety concerns. What are some ways Manheim locations are enhancing safety?
Huang: We've made a substantial investment in first creating a culture of talking about safety. We call it our Near Miss program. We launched it in May. Near misses are things that can be corrected. It's OK to talk about and point things out that we could be doing better to make sure it doesn't become a safety issue.
The second piece is we're continuing to invest in tools. Simulcast is a tool we can invest in because we know the more comfortable our buyers and sellers are buying online allows us not to have to physically run the cars through the lanes. We make about 50 million moves a year, so any move we can eliminate makes it safer. We're never going to eliminate all the moves, but could we cut it down to 40 million or even 30 million?
AF: Last question. Could you give us your thoughts on the industry at large? We're seeing a dip in new-car sales. Being downstream at auctions, that's going to eventually reach you. How can the auction industry deal with that in the coming years?
Huang: It's already happening. Being a 75-year-old company, we've lived through several booms and busts. Our finance team loves the fact that we're cyclical. The last recession that started in 2008 got to us in 2011. If there's a downturn on the new-car side, we have several years before it really hits us. And we have a lot of commercial cars. Being a more full-service provider opens up new channels of business that we didn't have during the last recession.