April 22, 2019 | by DAVID MULLER | Autonews.com
Even as used-vehicle sales and revenue are on the rise, dealers are facing increased competition.
The industry’s most prominent new competitor in the used-vehicle market, online startup Carvana, debuts at No. 8 on Automotive News’ list of the top 100 retailers based in the U.S. ranked by used-vehicle retail sales. Carvana retailed 94,108 vehicles in 2018, more than double what it sold the year before. The company was not on the 2017 list.
Since it went public nearly two years ago, Carvana has been moving headlong into new markets to sell about 15,000 vehicles for sale on its website. It offered as-soon-as-next-day delivery in 85 markets at the end of 2018. That number had risen to 115 markets by mid-April.
Carvana’s rapid growth has the industry taking note. Carvana CEO Ernie Garcia calls it just the beginning.
Most consumers “still don’t even know exactly what is meant when you say you ‘buy a car online,’ ” Garcia said on the company’s fourth-quarter earnings call.
As consumers gain awareness of Carvana and get “more comfortable with what we do,” Garcia said, the company’s sales could skyrocket. Garcia predicts the online retailer can reach 2 million units in sales, which would put it far ahead of any other retailer in Automotive News’ top 100.
That goal of 2 million vehicles generally will result from reducing prices and making the buying experience less cumbersome, Garcia has said. With the largest player having just a 1.8 percent market share, the used-vehicle market is fragmented and wide open to more competition, he notes.
The largest player Garcia was referring to is CarMax, which once again finished first on the top 100, with a 7.5 percent gain in used-vehicle sales to 721,512. It was followed by Penske Automotive Group, which posted a 12 percent increase to 282,500 used vehicles. AutoNation rounded out the top three with a 1.5 percent bump, retailing 237,722 used vehicles.
Lithia Motors rose to the No. 4 spot, with sales of 151,234, swapping places with Group 1 Automotive, which had sales of 147,999 used vehicles for the No. 5 spot. Sonic Automotive Inc. and Hendrick Automotive Group followed in the No. 6 and No. 7 spots. After Carvana, Asbury Automotive Group Inc. and Larry H. Miller Dealerships rounded out the top 10.
Growth for top 100
Total used-vehicle retail sales across the top 100 grew 9.7 percent to 3.4 million last year. The top 100’s share of the overall used-vehicle market also grew, from 7.8 percent in 2017 to 8.6 percent in 2018. Industrywide used-vehicle sales edged up to 39.5 million units last year vs. 39.4 million in 2017, according to Cox Automotive. Across the top 100, used-retail revenue in 2018 rose 12 percent to $70.4 million.
Some retailers benefited on the used side as new-vehicle affordability challenges pushed some buyers into the used market. Other retailers climbed the used ranking by acquiring dealerships.
For Morgan Auto Group in Tampa, Fla., which jumped seven spots to No. 20, both strong used sales and acquisitions helped, CEO Brett Morgan said. But strong used sales did not cut into sales of new vehicles at the dealership group — at least not last year.
“It’s really just been in the last 90 days that our new business has softened,” Morgan told Automotive News. “We’re not hitting the panic button there yet.”
In 2018, used-vehicle sales at the 37-store group rose 4 percent on a same-store basis, Morgan said. In total, sales soared 29 percent to 25,066 vehicles, according to the Automotive News Data Center. The group acquired eight stores in 2018.
‘Back to basics’
Morgan’s used-vehicle sales have continued to pick up speed in 2019, with total sales up 42 percent through March and same-store sales up 12 percent.
Morgan credited the growth to a “back to basics” strategy. That included a comprehensive digital retailing component, focused pricing and frontline strategies such as properly displaying vehicles on the lot.
Jumping into the top 20 on the list were Napleton Automotive Group and Chapman Automotive Group. Napleton hopped five spots to No. 16, while Chapman climbed 15 spots to No. 18. Island Auto Group climbed eight spots to No. 48, while Gee Automotive moved up 15 spots to No. 51. And #1 Cochran Automotive rose 11 spots to No. 74.
After Carvana, the companies with the biggest year-over-year increases were Chapman, with a 54 percent gain, and Feldman Automotive Group, with a 48 percent spike.
Taking the biggest tumble down the list was Tuttle-Click Automotive Group, with a 17-spot drop to finish at No. 100. McCombs Automotive dropped 12 spots to No. 67. Bergstrom Automotive, Russ Darrow Group and Mac Haik Auto Group all slid 11 spots in 2018.
Some retailers that might have qualified for the top 100 declined to respond to Automotive News’ survey. They included Berkshire Hathaway Automotive, formerly Van Tuyl Group.
Ten retailers on last year’s list either did not meet this year’s cutoff or didn’t respond for the 2018 list. One of them, Reagor Dykes Auto Group of Lubbock, Texas, is operating under Chapter 11 bankruptcy protection after being sued by Ford Motor Credit Co., which accused the dealership group of massive floorplan financing fraud. It was No. 70 on last year’s list.
Ten retailers are either new to the list or returning after an absence in 2017. After Carvana, the highest-ranking among those 10 was Cardinale Group at No. 19.
