Shares in car listings site Auto Trader (AUTO) are down 6.4% to 387.6p on reports eBay has agreed to buy the Motors.co.uk website and make it part of its Gumtree site.
The deal is reportedly subject to approval by regulators and is expected to complete in early 2019. While Auto Trader attracts 10.3m unique visitors a month and had around 450,000 car listings at the last count, the combination of Motors.co.uk and Gumtree should reach 10m and have 620,000 car listings.
Auto Trader is a strong brand but a core strength of the business up until now has been its leadership position in the market.
Similar to Rightmove (RMV) in the property sphere, by having the largest number of listings it becomes the one most checked by prospective purchasers and therefore a must-have subscription-based product for estate agents or in this case car dealerships.
This has also enabled Auto Trader to consistently boost its average revenue per retailer forecourt. Stronger competition might put this metric under pressure.
Investors will be watching Auto Trader’s response closely when it announces its half year results on 8 November.
