eBay Headed for a Collision in Car Auctions

eBay(EBAY Quote) is about to get a little credible competition in online automobile auctions.

AutoTrader.com, eBay's one-time partner on the Web, plans to launch a competitor to eBay Motors early next month, the company said this week. The new auction product from AutoTrader.com, the dominant online used-car site, could pinch one of the growth drivers that bolster eBay's pricey stock multiple.

"I think AutoTrader has a great opportunity," said Scott Weitzman, senior director of automotive Internet research for J.D. Power & Associates. "They have a great pool of used-vehicle buyers and shoppers. While their raw numbers may not be as large as eBay, the folks on AutoTrader are focused on the automobile market."

But eBay doesn't feel threatened by AutoTrader.com's impending move, said Stephanie Tilenius, vice president and general manger of eBay Motors. She said eBay Motors is the No. 1 used-car auction marketplace and the most visited auto site on the Web.

"The used-car industry is so big that we don't see this as a serious threat to our position. There's tons of room for other players," she said.

eBay Motors has become an increasingly important part of eBay's business. Launched with AutoTrader.com's help in the spring of 2000, the site will account for about $2.6 billion in gross merchandise sales and about $91 million in revenue this year, estimates Steve Weinstein of Pacific Crest Securities. Wall Street analysts expect eBay (EBAY Quote) to pull in about $1.2 billion in revenue this year, according to Thomson Financial/First Call.

Meanwhile, eBay Motors has been a big part of the company's plan to hit $3 billion in revenue in 2005.

eBay shares closed up 81 cents, or 1.17%, to $70.09, during regular hours Tuesday. The company is now trading at 85.5 times projected 2002 earnings.