Interview: Manheim Auction Looks to a New Fleet Future

Used Car Auctions Move into the EV/Autonomous World

For 73 years, Manheim Auction has successfully auctioned large numbers of used cars from sellers to buyers. The automotive world is changing, though, so, recently, the company began offering the reconditioning services they use in auto remarketing directly to dealers and fleets, and they have also invested in San Francisco-based fleet and autonomy startup Ridecell to move into the future of mobility.

The Leader in Used Car Remarketing

Did you ever wonder what happens when you trade in a five-year-old Honda at a Toyota dealership? Or where all those Hertz cars go at the end of their rental life? Chances are, they go to an auto wholesaler.

Manheim, part of Cox Enterprises, is the largest automotive remarketing company in the United States. They employ 18,000 people and auction off about eight million cars a year through 130 locations across the country.

I visited Manheim San Francisco Bay, a medium-sized facility in Hayward, California, that moves 100,000 cars a year. Established in 1987, it’s one of six in California, and sits on 72 acres, 20 of them not contiguous. Space is at a real premium in Hayward, so the cars are very carefully staged and stored to keep them moving.

How does the auction work? Very quickly, every Wednesday, 52 weeks a year, starting at 9:30 a.m. The auction takes only a few hours. Cars arrive from many sources, including dealers and fleets, but they all get inspected, cleaned up and some are repaired. Then, they are driven through the 12 lanes of the sales area like a herd of cattle. About 1,500 dealers and commercial clients restock their inventories from live and digital online purchases.

A cattle drive is a good analogy, because the lightning fast auction process employs the same set of auctioneers who may be selling off cows and hogs on a different day. Their rapid patter encourages bidders to grab the cars fast, because they move through the lanes at one car a minute or faster. It’s pure cacophony as 12 super-fast-talking professionals do their pitch simultaneously.

A buyer need not be present. Digital screens show the offsite bids. Greg Beck, the general manager of the Hayward facility, says that what they call the “simulcast attendance” has doubled from around 400 to about 800 online buyers. That’s part of why careful inspection and reconditioning are so critical. Manheim makes its money on seller and buyer fees and doesn’t own any of the cars it sells.

I watched cars roll through several of the lanes. In one, a little Smart awaited its fate. The bids reached $2,900 and stopped. Did that car sell? I wondered if its wholesale value had dropped that low.

Electric Cars on the Block

I asked Beck about electric cars in the wholesale auction world.

“Electric cars have expanded rapidly in the last two years,” he said. “We sell about 75 percent of the ones we get—in fact, we have about 600 EVs on the lot right now.” Models include the Nissan Leaf, Fiat 500e, BMW i3 and Smart ED. To accommodate the EVs, Manheim San Francisco Bay has installed 20 charging stations, as they expect more and more EVs to pass through in the future.

Not all cars sell the first time through, but Manheim has the expertise to make them as appealing as possible. If a car doesn’t go in three weeks, the seller may be advised to take the car back and think it over.

The Growth of Retail Reconditioning

What brought me out to Manheim on this particular sunny Wednesday morning was the opening of its new retail reconditioning facility. Reconditioning in the wholesale auction business is there to make the cars more appealing so they sell quickly. Unsold cars clog up the works, and nobody is happy.

But retail reconditioning is for another purpose. A rental car company, for example, may need to get a batch of cars ready to sell–on their own lots. Looking towards the future, the growth of mobility fleets, such as Getaround in San Francisco, and, someday, autonomous fleets, means there’s a huge business opportunity for providing reconditioning for fleet cars Manheim will never sell themselves.

“We can help mobility providers both for in fleet and defleet operations,” said Fredrick Standfield, VP of Assurance at Manheim. In fleet means maintaining a car that stays with the provider, while defleeting is moving cars the provider wants to sell off. “It’s going to be a bigger market in the future,” said Standfield. “And there will be new jobs created. Clients won’t have to build their own reconditioning facilities, and they’ll get faster service.”

Manheim has invested half a million dollars in a 20,000-square-foot facility on three acres near the main site to use for retail reconditioning. It was quiet when I visited for the ribbon-cutting ceremony, but it should be humming soon, and pushing through 100 cars a week, brought back to full health by experts who can clean, paint, and repair them quickly, efficiently and in one location.

As the business model changes, dealers and the new mobility fleets may not want to do the reconditioning work themselves. It becomes a better deal to leave the entire process to someone like Manheim. The company gets the cars back on the lot, ready to sell, in just four to 10 days.

“The convenience and flexibility generated by Manheim’s retail reconditioning solution help dealers improve efficiency, speed, capacity and margins,” said Beck. “It can even reduce costs, by avoiding vehicle transport to and from multiple locations, and enhance the unit’s value.”

The new Hayward facility is Manheim’s 19^th, all of them aimed at the $24 billion retail reconditioning industry.

Investment in Ridecell

I subsequently had a conversation with David Liniado, VP of New Growth & Development at Cox Automotive, Manheim’s parent. We talked about the company’s recent investment in Ridecell, the fleet and autonomy startup, and about the future of mobility for his company and the industry at large.

Liniado said there were two main reasons for the Ridecell investment. The first is that Cox is investing in innovative companies across the spectrum of vehicle mobility, and Ridecell’s expertise and technology will be key in the future of fleet management. “We like the direction they’re going and want to be involved and learn from it.”

The second reason for a Ridecell connection is that their (Ridecell’s) clients will integrate seamlessly with Cox’s services. “We can bring efficiencies to the market for management of shared fleet programs,” said Liniado.

Liniado believes that Cox’s connection with Ridecell will create a real opportunity to enable public and private partnerships for shared mobility EV fleet–something they were already planning to do.

The Future of Mobility

Liniado believes that in the future, some things will change, but others will remain the same. While the company is a passionate advocate for shared mobility and enhanced public transportation, they also believe that car ownership and the freedom to have your own vehicle won’t go away.

“The two can go together,” Liniado said. “For example, an individual could place their car in a shared network, such as Getaround.”

Manheim is ideally set up for shared mobility programs with its physical infrastructure, which is growing with the retail reconditioning centers and the ability to provide mobile service where fleets are.

Liniado believes that mobility fleets, combined with the internet, can become a core part of enabling automotive retailing.

“Digital is affecting multiple parts of the business,” he said. “We have more vehicles in wholesale online. For example, with AutoTrader’s connected retail, consumers can buy or lease vehicles seamlessly online. That’s why we are making investments in technology.”

Liniado also sees innovations coming in vehicle subscriptions, where the consumer moves from ownership to shared mobility. Cox has made investments there, launching Flexdrive in 2014.

“We are at an inflection point now, so we are accelerating investments and efforts to be an innovative player,” said Liniado.

It’s an exciting time of change in the car business, and Manheim and Cox Automotive are right in the middle of it.

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