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In 1945, World War II came to an end, kicking off an era of economic expansion in the United States that would eventually include the auto industry.

That same year, a one-lane auto auction opened in southern Pennsylvania.

Less than 15 years later, with the auto industry humming along, Manheim Auto Auction was the world’s largest.

Having since become an international auction company that includes 111 physical, digital and mobile locations, Manheim is celebrating its 75th anniversary this year, and its management certainly sees the parallels between the post-war economic boom and the early growth of its auction business.

“I think that was the impetus of why someone thought we needed a car auction,” Manheim president Grace Huang said during an Auto Remarketing interview of Cox Automotive leaders at NADA Show 2020. “The whole industry has been built on the tailwinds.”

Not to mention the spike in the U.S. population that occurred with the Baby Boom, beginning in 1946.

“So, it’s logical that if there are even more people, you need more cars. If you have more cars, you’ll have more used cars,” said Huang’s predecessor, Janet Barnard, who now is executive vice president and chief people officer of parent company Cox Automotive.

“And we still see it. Manheim benefits, in some ways, from a strong economy — also, it sometimes benefits from a weak economy, because we get repos through Manheim,” she said. “It’s one of those businesses that tends to weather the storms pretty well — obviously, when it’s lasted for 75 years, when most businesses don’t last 15.”

Manheim milestones

The past 75 years have certainly had a fair share of milestones for Manheim, not the least of which occurred in 1968, when it was acquired by Cox Enterprises.

In 1989, Manheim had expanded to include 25 physical auctions. And by the middle of the next decade, the auction company would begin a series of expansions largely focused on digital. Manheim hosted its first satellite auction in 1994, and three years later, would launch a website for dealers.

By 1998, dealers could download Manheim Market Reports to their personal computers.

Four years later, Manheim launched Simulcast, and in 2004, it launched Online Vehicle Exchange (OVE).

Joe George, who now is president of the Cox Automotive Mobility Solutions Group, headed up the launches of those products some 15-20 years ago.

“We were selling cars on the Internet the same time eBay was starting to selling Beanie Babies,” he said.

Such innovation illustrates how proactive dealers can be in this regard, George said.

But it wasn’t easy, and not all dealers in the auction lanes took kindly to Simulcast sales at first. Some were “flipping the cameras off,” George said, or even putting duct tape over the cameras, Barnard said.

So, what was their beef?

“They didn’t think real people were bidding. They didn’t want the competition from (online buyers). Because part of the benefit is, you show up and whatever the crowd is, the crowd is. But now there was this new X factor that they didn’t understand,” George said.

Added Barnard, “Change is hard.”

What shifted and led to the eventual acceptance?

“We’ve had to be very proactive with being their eyes and ears and feet and nose with the cars. And being there to backstop if there was a problem with the car. Because it’s a little different to buy a car sight-unseen,” George said. “The whole industry is built on, basically, coming to inspect the cars before you buy them. The onus is on the buyer.”

With the move to digital, “condition reports had to evolve, imaging had to evolve,” he said.  And Manheim to continue to foster trust in its marketplace and continue to build on that.

Digital operation system takes hold 

Another Manheim milestone is more recent: its new auction operating system that brought the company from a paper-heavy dot matrix printer system to a digitized, mobile process.

“I still remember one of the first auctions I visited, I walked in and everybody was huddled around the copy machine. And the sale had come to a halt because we couldn’t print anything,” Barnard said. “We couldn’t check people out. And that was kind of a sign that things needed to change pretty dramatically.”

And change dramatically it has. Manheim has finished rolling out its paperless auction process and “re-platforming” the operating system throughout its locations, “which is really the enabler in the acceleration of us moving online,” Huang said.

New roles for auctions

Speaking of moving further digitally, Auto Remarketing asked the trio of Cox Automotive leaders what Manheim might look like in not 75 years, but 7.5 years?

It’s certainly a wholesale auto environment where the leader of an auction group (Huang and Manheim) works side-by-side with someone who heads up a digital/tech-focused group (George and Cox Automotive Mobility Solutions Group).

“We are rapidly moving our cars to be sold online. Last year, 48% of our cars were sold online. We exited the year at 50%, and we were actually over 50% in January,” Huang said.  “We’re pretty sure that this year, 2020, is the year of the tipping point.”

And that reflects the changing nature of the work Manheim clients could ask the company to conduct. 

During a recent visit to Manheim Denver, Huang was standing with a client in Lane 20, with a clear view down to Lane 1. That was due to the auction running fewer cars through the physical lane, instead utilizing digital blocks.

“And he was eyeing it, and I was like, ‘Yes, we’ve already thought about using all this space for reconditioning.’ Because that’s what he was there for,” Huang said. “They buy from us, but they also do a lot of reconditioning work with us. And so that’s what he cared about. He was less worried about the buy-sell, he was more worried about us continuing to grow our reconditioning capacity.”

That’s where Huang’s cross-division work with George comes into play.

She points out that, “we know that most of the sales will happen online. (But) cars will still physically probably have to be on the lot somewhere.”

Manheim will have to look at how it leverages that space, while maximizing its reconditioning capacity, which can include “millions of cars in a year” going through recon, Huang said.

“How do we leverage that asset?” she said. “That’s where we’ve been partnering with Joe in terms of thinking about, what are the needs of fleets in the future? If you come on to our lots today, you’ll see a lot of (Amazon) Prime trucks … they’re all over lots these days because somebody needs to take that Amazon truck and make it an Amazon truck.”

Or de-fleet the trucks and recondition the vehicles, which can be driven hard, even if not for extensive miles.

“That’s their face to the customer,” Huang said of Amazon and its trucks. “They don’t want necessarily a really banged-up truck showing up at somebody’s house making a delivery.”

More digital, electric

In June, Manheim launched its first all-digital auction location, Manheim Tucson. This was the first to incorporate a 100% digital format, utilizing a four-lane setup where cars are parked in designated spots and sold to buyers both physically present at the facility and online.

In January, Manheim transitioned all of its Class A trucks (aka semi-trucks) at its Indianapolis location to digital lanes. During the February interview, Huang said that within 60 days, Manheim would be transitioning a “larger location” to 100% digital.

And even beyond that, some auctions have a mix of digital lanes and physical lanes.

“For the bigger locations, we’re systematically hitting clients one at a time, to convert all of their cars to the digital block,” Huang said.

Another area of change within the auto industry is electrification, which impacts the wholesale side, as well.

Much like the auction industry has had to adapt the Internet over the past 25 years, more electric vehicles in the used-car fleet will be an adjustment for auctions, particularly as they navigate the charging station infrastructure.

“It’s happening again. We’ll talk about this seven-and-a-half years from now,” George said.

Huang and her team are working with George and his team, along with Kelley Blue Book about what should be contained in an electric vehicle condition report and what creates value.

Battery health certainly can be a concern.

“We know that from our consignors who are selling electric vehicles, dealers aren’t willing to take on the risk. They don’t know if it’s a 50-mile battery or a 150-mile battery or a 300-mile battery. And in the future, the number of miles driven for that vehicle is not really relevant — it’s all about that battery,” Huang said.

“And right now, dealers are taking a massive discount. So, our sellers are taking a huge hit, which obviously impacts residuals and leasing, so forth, down the stream for future electric vehicles,” she said.

Condition reports for EVs could be paramount.

“(Going) back to that trust thing, why dealers went to Simulcast, why they went to OVE, is the AutoGrade system and condition report system,” George said. “This is just the next step for Manheim.”

More Info:

  • The original Manheim location, now known as Manheim Pennsylvania, will host a 75th anniversary celebration on March 26 at the auction, located in Manheim, Pa. Originally a one-lane facility, the auction now has 38 physical lanes and four digital lanes.
     
  • More than 500,000 cars are offered for sale each year through the auction, which is the largest in the world. Manheim, as a company, now includes 111 physical, digital and mobile locations. Manheim will celebrate its 75th anniversary throughout the year.
     
  • “For us, it’s about celebrating that past and honoring that past, but also looking forward to the future,” said Manheim president Grace Huang.