EBay Stalls the Engine of Its Auto Sales Unit

Ebay paypal
Ebay paypal

EBay (EBAY) should just pull the trigger and rename itself PayPal.

Last quarter, a major e-commerce pioneer posted revenue growth of just 11% in its core "Marketplaces" unit. Meanwhile, revenue in the "Payments" business (aka PayPal) raced ahead 32%. At this rate, eBay proper will soon be producing less money than the PayPal "subsidiary" -- and eBay's latest move with its "eBay Motors" business isn't helping matters.

Once ballyhooed as "the Internet's largest marketplace for buying and selling all things automotive," eBay Motors contributes about 12% of Marketplaces' gross merchandise volume. That number's been slipping, however. In eBay's first quarter, Motors' GMV declined 9%, versus a 9% rise in overall Marketplaces GMV.

Now, in what looks like an attempt to goose profits at Motors, eBay is yanking the suspension that supports sales at the unit.

Since 2009, eBay has soothed car-buyer concerns and encouraged sales by offering free vehicle history reports through AutoCheck (a competitor to the better-known "Carfax"). Click on any car advertised for sale on eBay, and the company would tell you everything you wanted to know about its history -- how many owners had played hot potato with this lemon over the years, whether it used to be a rental car, whether it had been involved in any major accidents, and so on.

With such knowledge in hand, a buyer could bid with confidence.

$10: A Steep Price to Pay?

No longer. To little fanfare, eBay quietly changed its policy with regard to AutoCheck last month. Sure, you can still get reports through eBay. But now you must pay for them upfront -- $10 a pop. On the one hand, eBay boasts that this is a "65% savings" off AutoCheck's usual rates. On the other hand, though, $10 is infinitely more expensive than "free."

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Will this dissuade looky-loos from wasting car sellers' time with spurious or low-balling bids? Perhaps. Will it save eBay some dough, now that it's no longer footing the bill for AutoCheck? Definitely.

On the other hand, in removing one extra layer of comfort that car buyers could rely upon, eBay's move is almost certain to speed the decline of its Motors unit, and that's bad news for the stock.

Car buyers and investors beware.

Motley Fool contributor Rich Smith holds no position in any company mentioned. Motley Fool newsletter services have recommended buying shares of eBay.