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Drive Motors Aims to Break Silicon Valley Mold

Drive Motors’ Aaron Krane is attempting to succeed where other Silicon Valley startups have failed: changing the car-buying experience without disrupting dealer profitability.

December 2016, F&I and Showroom - Cover Story

by Eric Gandarilla

Photos by Terence Bordon.
Photos by Terence Bordon.

It was three hours after the New Year’s bell had rung, and an online shopper was in the final steps of completing a vehicle purchase from the website of a top-grossing Toyota store in the San Francisco Bay Area. Earlier that day, the dealership had launched one of the earliest versions of Drive Motors, an online checkout solution that would allow its digital storefront to stay open past closing hours. Less than 24 hours later, the system delivered its first sale.

From start to finish, the checkout process involved no interaction with any dealership employee. Instead, the website’s multistep process guided the customer through the F&I product sale, appraisal of his trade, selection of finance terms, and application for credit.

“At 3 a.m. on New Year’s Day, someone ordered a Prius with a window tint and extended service contract,” says Aaron Krane, CEO and founder of Drive Motors. “That was our first order ever.”

By the speed of the process and the result of the transaction, Krane knew he was onto something. Not only did Drive Motors prove it could move the metal, it proved it could move the F&I profit needle as well.  

The Non-TrueCar Model

Based in San Francisco, Drive Motors is a north-of-Silicon Valley startup that has the backing of Y Combinator, the Mountain View, Calif.-based startup accelerator responsible for brands like Dropbox and Airbnb, and venture capital firms Propel Venture Partners and Khosla Ventures.

Krane is a 34-year-old serial entrepreneur who founded Hitpost, a mobile app company acquired by Yahoo in 2013. He says his newest venture wasn’t built to be the next-gen Autotrader or TrueCar startup. The firm’s decision to adopt a software-as-a-service model that charges dealerships — regardless of size or number of transactions — a flat $795 monthly fee is evidence of that.

Krane says many dealers are realizing returns 10 to 20 times the cost of the solution within a month of signing up, and the flat fee demonstrates the firm’s main goal is to sign as many dealerships as possible. In other words, Krane and his team didn’t want pricing to stand in the way of any dealer giving Drive Motors a shot. So far, that approach seems to be paying off. Since that 3 a.m. sale 10 months ago, the company’s dealer count has climbed past 150, including three of the nation’s largest dealer groups.

In a July 26 earnings call, officials with Asbury Automotive revealed the 82-rooftop group was working with “some third parties” on an online buying option. By August, trade publications reported they were referencing Drive Motors.

According to Krane, the dealer group had been working with his firm in secret for seven months when the reports began circulating — Asbury having added Drive Motors’ online checkout to six dealer websites. Asbury officials declined to comment for this story, but COO David Hult told Automotive News in August that F&I sales through the Drive Motors’ solution were “at or above the store level.” However, he noted that there weren’t enough Drive Motors transactions to offer a reliable per-copy average.

Krane reports that about half of all Drive Motors transactions have included at least one F&I product. He says the company’s immediate goal is to grow its rooftop count to 2,000, a lofty target that seems possible due to its very public partnership with Asbury.

Company founder Aaron Krane says about half of all transactions through his solution have included at least one F&I product.
Company founder Aaron Krane says about half of all transactions through his solution have included at least one F&I product.

“Since we’ve gotten the story out, we’ve actually signed up as many dealerships as we did in the preceding seven months in a matter of weeks, and we still aren’t actively investing in marketing yet,” he says.

Filling a Void

The idea behind Drive Motors emerged a little more than two years ago, or about a year after Hitpost was sold to Yahoo. Krane had joined San Francisco-based Khosla Ventures as an entrepreneur in residence, a role he describes as “open-ended and amorphous.”

Essentially, Krane’s job was to seek out business ideas to develop a new company. Most of his pitches to Khosla Ventures portfolio companies were met with a “No,” he says, and the occasional “Yes” came with the caveat that he wasn’t the right person to lead the business. 

After his fifth or sixth business pitch, Krane realized he needed to buy a car. At the time, he was driving a 15-year-old Toyota Corolla that belonged to a Hitpost engineer. He set his sights on the Mercedes-AMG CLA45 and, not wanting to waste any time, began searching for a dealership that had the car and could sell it to him online. To his surprise, he found the car but not the process.

“And that baffled me. No, it flabbergasted me,” Krane says. “It seemed like a travesty that there wasn’t some web experience enabling me to spend all this money on a new car the moment I made my decision.”

Krane spent the next six months researching the history of ecommerce and Silicon Valley’s approach to automotive. He also spoke to people across the supply chain, from manufacturers and their counsel to dealership internet managers and everyone in between. He concluded that Silicon Valley’s approach had been unnecessarily disruptive.

For his platform to stand a chance, Krane figured, it had to integrate into a dealership’s current process as seamlessly as possible. In other words, he had to work with dealers, not against them.

Inventory export feeds and access to a dealership’s inventory aren’t required. Once the solution is integrated, customers will be able to search through and purchase any vehicle in the dealership’s inventory. They can also add F&I products to their deal.
Inventory export feeds and access to a dealership’s inventory aren’t required. Once the solution is integrated, customers will be able to search through and purchase any vehicle in the dealership’s inventory. They can also add F&I products to their deal.

“If we were going to make something that would actually be easy for dealers to adopt, it could not require any change of behavior. If anything, it had to remove steps,” Krane says. “That’s when we decided the simplest solution for dealers would be this checkout solution — which closed customers on their site and automated data entry into their existing financing software.

“So nothing changed,” he adds. “They saved a little time on data entry, and they still maintained full control over transacting.”

Ease of Use

Any dealership website is compatible with Drive Motors, Krane says. All it takes is a snippet of code added to the site header. Inventory export feeds and access to a dealership’s inventory aren’t required. The platform also integrates with whatever CRM or desking software the dealership uses, including solutions from Dealer.com, Dealertrack, RouteOne, VinSolutions, vAuto, DealerSocket, and more, according to the company’s website.  

The only part that requires some additional legwork is the customization of the F&I product portion of the Drive Motors solution. Dealerships can select which products to offer through the system, add a description and price, and customize the terms of the products. As of late November, the platform didn’t include the option to post product videos and high-resolution photos alongside those descriptions, but Krane says that will soon change.

Once the initial setup is completed and the product has been integrated, the dealer’s website is ready to transact. The only evidence that the site is ecommerce-ready is the green “Buy Now” button that appears alongside every car listing. Once selected, Drive Motors’ checkout solution slides out from the right of the dealer’s webpage.

The system first presents the dealership’s F&I protections. Once product selections are made (or the customer opts to skip that part of the process), the widget asks whether the customer is trading in a vehicle. If the answer is “Yes,” the system engages Kelley Blue Book’s trade-in evaluation tool; the final valuation is confirmed once a dealership employee inspects the vehicle.

The Drive Motors’ solution costs a flat fee of $795 a month, regardless of the dealership’s size or number of transactions.
The Drive Motors’ solution costs a flat fee of $795 a month, regardless of the dealership’s size or number of transactions.

Customers are then asked to enter their personal information in order to run a credit check. They are then prompted to select their finance or lease terms. The data is then pushed into the dealership’s financing software, which structures the deal and processes it within the dealership’s existing workflow. Dealers can offer buyers the option to complete the paperwork and take delivery of the vehicle at the dealership, or they can have the vehicle delivered and sign the final paperwork at home.

A New Customer

Drive Motors’ executive team primarily consists of individuals from the tech industry. But in order for dealers to take his dealer-centric approach seriously, Krane knew he needed an industry insider within his firm’s executive ranks. In August, the company named David Luce as its vice president of sales. The more than 25-year industry veteran spent 14 years in retail, serving as an F&I director and general manager before operating his own dealership. He also spent three years at Mercedes-Benz Credit Corp. and eight years with Market Scan Information Systems.

Krane, however, knows he’ll need more than industry insiders to win over F&I pros. In fact, he’s keenly aware of how F&I vets view the current digital push. He’s also cognizant of the F&I industry’s long-held belief that customers shouldn’t be pre-exposed to F&I products and pricing before the vehicle is sold. However, the transaction data Drive Motors has collected so far tells him that customers will buy F&I products online. At the very least, he says, his solution will tee up F&I managers to offer service contract upgrades or other products when customers come in to complete their paperwork and take delivery of the vehicle.

He does make clear, however, that F&I products are “legitimately useful products that were created for legitimate reasons.” And if presented without pressure, he adds, they will appeal to the correct buyer. He knows most F&I pros won’t agree with that, but he believes the industry has never really experienced a true ecommerce customer.

“The overall checkout experience just feels like ecommerce,” he says. “So for the first time in the history of car purchases, car buyers are starting to act like ecommerce consumers and getting excited in their own home and [selling] themselves up thousands of dollars.”

Best of Both Worlds

Drive Motors is compatible with any dealership website. All it takes to integrate the online checkout solution is a snippet of code added to a site’s header.
Drive Motors is compatible with any dealership website. All it takes to integrate the online checkout solution is a snippet of code added to a site’s header.

Krane’s growth strategy is simple: produce a fundamentally high-quality product that delivers on its promise and can predictably generate at least 10 times its cost in profit to the dealer. And that’s exactly what his solution has delivered so far, he says.

Krane credits his system’s early returns to his team’s decision to research the automotive space instead of rushing the product to market. And to stay connected with his clients, Drive Motors has enlisted some of the top dealers in the nation to serve on an advisory board. Krane describes their feedback as “critical.”

The entrepreneur, however, still believes consumers will always want to experience products before they purchase them. He just believes that when they’re ready to buy, most consumers prefer to do so on their own terms and in their comfort zone. And that’s where Drive Motors comes in.

“Dealerships can get the best of both worlds by letting people physically experience products and letting them purchase them anywhere at any time,” he says. “We work with dealers because they are key to filling this need in the new-car space. We focus on what we do best, which is build the best ecommerce experience for consumers, so dealers can do what they do best, which is sell cars.”

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