18 October 1999: An automotive sales site run by Vauxhall, the UK-based auto manufacturer is set to launch what the company claims will be the world's first internet site through which cars can be bought directly from the maker. Such a move is widely thought to be automotive dealerships worst nightmare. The real threat may come from another quarter all together.

You have heard the mantra: "The internet changes everything," and it promises to change the automobile business more than many other things. Some 2 million new-car buyers, accounting for 13% of all new cars sold, used the net for buying or shopping in 1998. By 2003, says Forrester Research, that figure will grow to more than 50% -- half a million cars could be purchased over the net.

But the devil is in the details. Exactly how will the net change this industry? When it comes to selling cars, it's not just a matter of by-passing the middleman. Vauxhall's chairman, Nick Reilly discounts fears that manufacturers might use technology to bypass their dealers. His company, for instance will sell its cars on the net but deliver them via one of its 500 dealers. In addition, not all of Vauxhall's cars will be sold on the site -- only those that will not compete directly with showroom models.

Nevertheless, the models sold on the net will be cheaper than the nearest equivalent models in showrooms because of reduced distribution costs and the elimination of sales incentives. This means that traditional dealerships will be forced to differentiate their services if they want to protect their profits.

One likely outcome is more aggressive, hands-on promotional campaigns, like test-drive tracks and glitzy showrooms. Many consumers believe that a test drive is a necessity. One study found that 41% of car shoppers say net or no, they still want to take a test drive before purchasing a car. And 31% said it was simply more fun to shop for a car in person.

The real competition may on the sidelines, in consumer financing.

Online car loans are a bigger threat to the profitability of dealers, says Art Spinella, Vice President of CNW Marketing/Research, which conducted a study of auto business. "This is far more scary for dealers than the idea somebody is going to buy a car online," he says. "You're only making a couple hundred dollars on a new car. Where dealers are making $700, $800, $900, $1,500 or more is on the financing end of it."

One thing is certain, the auto industry is due for a few bumps as it drives from the information highway to the e-commerce superlot.