In an effort to decrease and streamline the size of its dealer network, GM announced today that they are working on a pilot program with eBay to auction new cars to the public.

“We’re also working on new ways to make car buying more convenient for our customers, including an innovative new partnership with eBay in California to revolutionize how people buy vehicles online,” said Fritz Henderson, GM’s recently appointed CEO. “Customers will be able to bid on actual vehicles just like they do in an eBay auction, including the option of choosing a predetermined ‘buy it now’ price. We’ll be testing this and other ideas with our dealers over the next few weeks, and hope to expand and build upon them in the coming months. In all cases, our goal is to make the shopping and buying process as easy as possible for GM customers – on their time and their terms. Stay tuned.”

This begs the question, is this legal? 49 of the 50 states in the US have very strict franchise laws around new car sales. New cars can only be sold by an authorized car dealership. The new GM is also taking a very big risk in terms of enraging an already shaken dealer body. This announcement comes less than 2 months after GM publicized the list of more than 1,000 dealers that would have to shut their doors.

While the announcement is ugly for the well-established dealer business in the US, it’s another step in the modern direction for the automotive industry. Dealers have been slow to embrace the new Internet information society and are suffering as a result. Not to say that the dealership business serves no purpose, but it is time to reevaluate what that purpose is.

The majority of Americans identify the dealership experience as the most painful part of the car buying experience. This is proven by the number of car shopping services and brokers that have sprung up over the last 20 years. If a product or service doesn’t add to the user experience, how can it continue to exist? GM is asking the same question with this pilot.

Legal issues aside, it will be interesting to see how both the dealer body and consumers react to this new approach to new car shopping.