Carvana’s new vehicle strategy turns dealership into ‘playground,’ test-drive center with sales all online

LivestreamMenuMake ItselectUSAINTLLivestreamSearch quotes, news & videosLivestreamWatchlistSIGN INCreate free accountMarketsBusinessInvestingTechPoliticsVideoWatchlistInvesting ClubPROLivestreamMenu DALLAS — Carvana is aiming to bring its online strategy for selling used vehicles to sales of new cars and trucks. But don't expect the company to actually sell you a vehicle at one of its seven Stellantis franchised dealerships. Instead, the online vehicle retailer said it intends to use such franchised dealerships as service locations, test drive centers and potentially "playgrounds" for consumers to decide what vehicle they would like to buy through Carvana's online platforms, marking a stark contrast from how traditional franchised dealers handle new products. "Every single car that we sell, whether it's used or new, is online," Tom Taira, Carvana president of special projects who's leading the new vehicle operations, told CNBC during an interview at its franchise in Texas. "That's a very inherent difference. Even coming into the store, you're buying it online, and that's a big difference in how people think about it." Through its used vehicles sales, Carvana has become the most valuable auto retailer in the U.S. with a more than $70 billion market cap. Carvana's target with the new vehicle business is to grow its market share and customer base as well as assist used vehicle sales through trade-ins and other means, according to Taira. If the company is successful, the strategy could cause a ripple effect across the U.S. franchised dealership model, which the National Automobile Dealers Association reports includes 16,990 retailers that topped $1.3 trillion in sales last year. This week marks the first time Carvana has publicly talked about its plans for new vehicles since it purchased its first Chrysler-Dodge-Jeep-Ram franchised store for Stellantis early last year in Arizona. Its network has since grown to other Carvana-popular markets in Sacramento and San Diego, California; Dallas; Atlanta; Cleveland; and Boston. "When we got into new cars, we said the only way we're going to make this happen is to ensure that it goes the Carvana way. That we actually sell cars exactly the same way that we do to used car customers," Taira said during a media event at its Dallas location. "Why break something that already works?" Carvana spent roughly $171 million on its acquisitions of new Stellantis vehicle franchised dealerships, excluding its most recent purchase of a retailer in Ohio, according to public filings. The company declined to disclose any further investments in the stores to implement its strategy. Taira and the company also declined to disclose Carvana's new vehicle sales so far or its future expansion plans for additional brands or other Stellantis dealerships. CNBC previously confirmed that the company has quickly grown its new vehicle sales, including a location in Arizona becoming the top-selling dealer in the country for Stellantis. "We believe that this was worth it to us, as long as we could go out and increase share and increase the pie," Taira said. He declined to comment on whether the new vehicle business is profitable. To be able to integrate its new vehicle sales into its current website, as first reported by CNBC, Carvana was approved as a certified website provider for Stellantis instead of utilizing mandated third-party companies. Several franchised dealers said they believed that was a unique benefit for Carvana. Stellantis, in an statement to CNBC, said Carvana operates as a "corporate owner" of its brands, similarly 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 automaker 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 is using a location in Dallas as a test center for its foray into new vehicle sales. The facility looks like a traditional Stellantis dealership from the outside, but the consumer process for purchasing a vehicle and the responsibilities of its employees are unprecedented. Couches and chairs replace cubicles and sales offices. There are no finance and insurance departments, and instead of an army of commission-based employees, the facility has associates that are paid hourly to assist customers — if they want the help. The experience is meant to be as self-guided as a customer wants. By scanning QR codes located on 10-foot-by-10-foot screens inside the building or on vehicles and displays outside, shoppers can customize a vehicle, learn about a product's features and conduct test drives before deciding whether to purchase anything. If they do decide to buy something, it

Carvana’s new vehicle strategy turns dealership into ‘playground,’ test-drive center with sales all online

Key takeaways

Also covered by

Carvana’s new vehicle strategy turns dealership into ‘playground,’ test-drive center with sales all online

Key takeaways

Also covered by

More in business