All Things Used Cars on Clubhouse has quickly become the best kept secret in automotive, in a poll of the ASOTU Crew. The amount of insights from actual practitioners is staggering. If you missed the room, you can still listen to it here. If not, don’t worry, here is the play-by-play.
David Long started the show with a quick market recap as usual:
And then he opened the floor with four questions around the day's topic:
Does this deal change your opinion of doing business with ADESA?
Paul Daly said we should take an emotional step back and remember this isn't about winning a battle but winning the war. Winning the war means having cars to sell that your customers want, and if ADESA has inventory, dealers will buy from them. But David Long said he does not see himself rushing out to buy from ADESA to "Build up the war chest of my direct competitor."
Do you see an upside?
Darrell Steed shared a perspective that Carvana could become a perfect place to move vehicles that do not fit your strategy. He suggested, "make sure to almost over ask for those cars," as Carvana seems to buy up almost any inventory to move to an adequate market dealer may not have access to.
Ian Nethercott called the merger an opportunity. Selling cars is all about the customers. And while Carvana will gain access to widespread auction capabilities, that business is still shifting and evolving rapidly, with smaller tech companies changing the game daily. On the other hand, dealerships can double down on the commitment to the customer experience.
Each time a disruptor comes into the industry, Patrick Abad said, "we get better."
Do you see all of the issues this could cause?
Brian Kramer pointed out that Carvana did not just get the auctions, but ADESA's existing infrastructure as well. The deal puts Carvana Recon centers within 100 miles of almost every major city in the US. The massive coverage will lead to an enormous number of vehicles moving through the shop. Still, most important of all, Carvana now has the tag and title registration abilities of ADESA's auction business. The tag and title ability equips Carvana to acquire cars and quickly move them from state to state.
Jarrod Kilway added that most of Carvana's issues before this acquisition have been getting titles to customers. This acquisition may close their biggest weakness, not to mention add auctions to their tool kit. Paul Brobson said that many other complaints about the company come from public comments regarding their vehicle reconditioning abilities. Lately, Carvana has been playing damage control, but the acquisition may improve their reconditioning as well.
Brian Benstock spoke of the takeover of dealers by manufacturers in Europe. They seem to be phasing out dealerships, and he says that trend will come here. One challenge will be an uneven playing field between dealers, Carvana-type companies, and up-and-coming companies like Tesla as regulations appear more rigidly applied to traditional car lots. He stressed awareness while David Long added that we need to be sure we focus on our house.
What should we do OR not do moving forward?
Brian Miller invited everyone to consider the market of streaming entertainment. Each of the giants has something the others do not. Netflix has good original content, Apple owns devices, and Comcast owns the infrastructure. Each stays relevant in the market due to what they do well. Dealers each have unique offerings giants like Carvana cannot provide. Thriving will require leadership identifying advantages and knowing how to implement or enhance them well.
Larry Feldman spoke about moving forward, looking for ways to be more creative with finding used cars and how aggressive we are in buying them.
Brian Benstock mentioned Carvana is thinking nationally, and we need to break out of thinking regionally to keep up, anything else would be naive. He said Carvana will "go broad with their reach and then go high with their gross," and when they get where they want, "good luck competing with them."
Patrick Brown stressed the importance of having a process and strategy. He said Carmax might offer a customer more, but his ability to write them a check that very second wins him inventory.
Jacci Grillo wanted to point out the great opportunity we have this year with NADA as a place to pool all our best ideas and poke holes in them together. She urged folks to evaluate each idea and tool with how it will benefit you short term, long term, and in the future.
A stepping stone?
There is a chance this purchase is a first step out of retail for Carvana. They have mentioned wanting to be bigger than Carmax by 2025, but Ben Hadley pointed out how fluid businesses could be these days. With Carvana moving toward loaning and Fintech, their market cap will increase, making this a free purchase. It would not be surprising to see blockchain-backed transactions come from Carvana shortly. In time, they may even enable dealers and auctions to utilize their acquired ADESA tag and title transfer service, becoming a provider to dealers as opposed to a competitor.
Closing thoughts:
Are you watching for acquisition opportunities? Are we measuring acquisition by sources? Are your processes in place and executable quickly with consistent success? The room wrapped up with Diego Vargas offering a reminder to stay studious and always be aware of the practical application. In the end, the 30,000-foot view of what could and could not come to be will not matter as much as what we do.
Next week, All Things Used Cars will be live from NADA with special guests and all the exciting information you have come to expect!