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is about to get a little credible competition in online automobile auctions., 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, 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'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'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

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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.

Last week, eBay and privately held

announced that they were calling an end to their partnership, which brought buyers from to eBay, as of the end of this year. At the time, the companies did not say why they canceled the deal. seems to have drawn on lessons learned from its nearly three-year relationship with eBay to build the upcoming site. The site will incorporate many of the same features as eBay, but will add a number of differences to make it more appealing to buyers and sellers, said Chip Perry, CEO of

Unlike eBay,'s site will charge only a listing fee, letting buyer and seller complete the transaction on their own.

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"We're taking all the handcuffs off. We're making it easier for sellers," Perry said.

Part of this philosophical difference between the two sites shows up in their fee schedules. eBay Motors' sellers pay a $40 fee for each car they list on the site and another $40 fee for each one they sell through the site. In contrast, plans to charge sellers only a $50 listing fee per car, which it plans to discount for dealers and other sellers who list large numbers of vehicles on the site.

Perry believes that dropping transaction fees will be a big hit with sellers. Dealers especially resent having to pay such fees when they have deadbeat bidders, buyers who place winning bids but never pay for the goods they win, he said. plans other options not found on eBay, including letting sellers end auctions early, listing on other sites during the auction, and allowing buyers to make "conditional" bids. Such offers would not be considered binding; instead, bidders would have the opportunity to get a car inspected or take it to a mechanic before being required to follow through on a purchase.

"We think our approach with conditional listings will open up the funnel

for online car auctions," Perry said.

Another option will alert buyer and seller when a bid is close to a seller's reserve -- or lowest acceptable -- price, to see if they can make a deal.

On eBay Motors, an auction could close even if the bidder and seller were within several hundred dollars of each other's price, because they might never know they were so close to a deal, Perry said. plans to target dealers as potential sellers on its auction site, opening the site to individual car owners in February, Perry said.

How much of a threat poses is a matter of debate. The online auction landscape is littered with companies that have failed at trying to compete with eBay, noted Weinstein.

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, for instance, is the largest e-tailer, but it wasn't able to convince its large selling base to buy from it in the auction format, Weinstein said.

The chief problem is trying to maintain the proper balance of supply and demand, he said. With too few sellers and car listings, buyers will turn to other sites. And with too few buyers and bids, sellers will, too.

But could prove more resilient than Amazon in auctions. The company is backed by the Cox media empire, including Cox's Trader Publishing Co. and Manheim Auctions, the largest wholesale car-auction company, with nearly $50 billion in gross merchandise sales. already has 2.2 million cars listed in its classified advertising format. And about 40,000 dealers nationwide list cars through the site.

In contrast, there are fewer than 17,000 passenger cars listed on eBay Motors, and fewer than 22,000 total vehicle listings, including motorcycles, buses and recreational vehicles. And eBay's through eBay Motors is a small fraction of the more than $350 billion used-car market.

Some 28% of used-car buyers who purchased a car they found online did so through's site, making it the No. 1 site for used-car purchases, according to J.D. Power & Associates. In contrast, just 5% of online used-car buyers found their car through eBay Motors.

Meanwhile, about 36% of used-car buyers who used the Internet to shop for their cars visited's site, making it the second-most popular site after Kelley Blue Book, according to J.D. Power. About 18% of used-car buyers shopped on eBay Motors.

"AutoTrader is the only entity out there that might be able to step into this auction aspect of the market and make it successful," J.D. Powers' Weitzman said.

But even if is able to make a go of it, the company will at best slow some of eBay Motor's revenue growth, Weinstein predicts. eBay will be saving about $36 million in fees that it was formerly paying to as part of their deal, Weinstein said. That money could be used to bring in another partner and to do a significant amount of marketing and promotion of eBay Motors, he said.

"I think for that money they can buy a lot of growth," he said.

eBay Motors plans to announce some new initiatives and partnerships next month, Tilenius said. She declined to give specifics.