Carvana purchased seven new vehicle franchises since last year that primarily sell Stellantis' Chrysler, Dodge, Jeep and Ram brands, marking the company's expansion into the new vehicle market. The move allows Carvana to access additional revenue streams and exclusive dealer auctions previously unavailable to the used-car retailer. One store in Arizona that Carvana purchased early last year has become Stellantis' largest volume store in the U.S., selling more than 700 new vehicles last month compared to an average of roughly 30 to 50 monthly sales prior to the acquisition. Industry experts believe the expansion could significantly disrupt the century-old franchised dealer system. The U.S. franchised dealership system includes 16,990 retailers that topped $1.3 trillion in sales last year, according to the National Automobile Dealers Association.
Arizona Store Sells 700+ Vehicles in Single Month
Carvana's first new car dealership for Stellantis in Casa Grande, Arizona, sold more than 700 new vehicles last month, according to Stellantis figures shared with dealers and provided to CNBC. That made it the best-selling store nationally and compares with an average of roughly 30 to 50 monthly sales the store was doing prior to Carvana purchasing it early last year, as first reported by The Wall Street Journal. The other new vehicle Stellantis franchises for Carvana are in Sacramento and San Diego, California; Dallas; Atlanta; Cleveland; and Boston.
Carvana Gains Access to Private Dealer Auctions and Lifecycle Revenue
Adding the new vehicle business provides additional revenue for Carvana and opens up other avenues for the company to more easily purchase used vehicles from their new vehicle customers and through exclusive auctions only open to franchised dealers. "That is a significant game changer in the secondary market," said John Murphy, a longtime Wall Street analyst and automotive consultant. "If that expands to other brands, that is going to be an advantage." The expansion helps Carvana better capitalize on the complete lifecycle of a vehicle, which includes new, used, parts and service, and finance and insurance. Brian Gordon, president of dealer advisor and broker Dave Cantin Group, said: "After stabilizing their core business, I think they realized, by looking at the franchise model, that there was a significant amount of revenue and gross profit opportunity that their business model didn't even contemplate."
Industry Experts and Dealers Respond to Franchise Expansion
"Carvana entering the new vehicle franchise business may be one of the most disruptive forces that auto retailing has seen in the U.S. market in decades," Murphy told CNBC. Carvana's foray into new vehicles and its rapid growth have been a discussion between Stellantis' current dealers and the company, according to Stellantis National Dealer Council Chairman Sean Hogan. "I'm curious to see what their strategy is and, in the long run, I think competition is good. So, if they're doing something better than we are, then we will need to adapt, or we're going to be irrelevant," said Hogan, vice president of Sierra Auto Group in California. A Stellantis dealer who asked for anonymity said: "It's bred out of desperation. It's given Carvana an opportunity to come into the new car space."
Stellantis Approves Carvana as Certified Website Provider
Stellantis has approved Carvana as a certified website provider for the automaker, which means it doesn't need to go through an approved third-party company, according to four people familiar with the decision, who requested anonymity to speak about matters that have not been made public. Stellantis, in a statement to CNBC, said Carvana operates as a "corporate owner" of its brands, similar to other large publicly traded companies such as Lithia and AutoNation. "We apply the same consistent standards and criteria to all dealer partners, and any organization that meets our qualifications is eligible to operate as a franchisee," the company said, adding that Stellantis "certifies tools and services that will enhance our program and be beneficial to our network. All certified providers must complete a rigorous onboarding process and meet program standards and requirement."
Carvana Operates Nationwide Logistics Infrastructure for Vehicle Processing
Carvana has built a nationwide logistics and processing company for vehicles similar to Amazon and its backend operations for processing and shipping consumer goods. "They have a pre-built out infrastructure, digitally, physically, logistically, that probably gives them an advantage over those big, multibranded public companies," said Larry Dominique, a longtime automotive executive turned industry consultant. Carvana puts each vehicle it intends to sell through a lengthy inspection, repair and sale preparation process. The company has reported it has the capacity to recondition approximately 1.5 million vehicles per year, which compares to its sales of less than 600,000 vehicles last year. Carvana's traditional customer locations are in addition to more than 100 other Carvana locations, mainly consisting of vending machines and processing centers.
FAQ
How many new vehicle franchises did Carvana purchase?
Carvana purchased seven new vehicle franchises since last year that primarily sell Stellantis' Chrysler, Dodge, Jeep and Ram brands. The locations are in Casa Grande, Arizona; Sacramento and San Diego, California; Dallas; Atlanta; Cleveland; and Boston.
What sales volume did Carvana's Arizona store achieve last month?
Carvana's Casa Grande, Arizona store sold more than 700 new vehicles last month, according to Stellantis figures shared with dealers and provided to CNBC. This made it the best-selling Stellantis store nationally and compares with an average of roughly 30 to 50 monthly sales the store was doing prior to Carvana purchasing it early last year.
Why is Carvana expanding into new vehicle sales?
Adding the new vehicle business provides additional revenue for Carvana and opens up access to exclusive auctions only open to franchised dealers, allowing the company to more easily purchase used vehicles. The expansion helps Carvana capitalize on the complete lifecycle of a vehicle, including new, used, parts and service, and finance and insurance.
