Carvana's pivot into buying brick-and-mortar dealerships is being framed as a move that could replicate the stock's 1,200% gain over the past three years, which turned a $10,000 investment into nearly $130,000. The company is using acquired locations as service and test-drive centers rather than traditional sales floors, with its first such dealership, a Stellantis franchise in Casa Grande, Arizona, selling more than 700 new vehicles last month compared to a prior average of 30 to 50. The strategy gives Carvana access to new-car buyers with trade-ins and exclusive dealer-only auctions, lowering inventory costs while adding higher-margin parts and service revenue. Citing AutoNation as a benchmark, parts and service generated only 19% of first-quarter revenue but nearly half of gross profit, and together with finance and insurance accounted for 78% of gross profit. With roughly seven dealerships acquired out of about 16,990 U.S. retailers that generated $1.3 trillion in sales last year, Carvana sees significant growth runway from this diversification into new-vehicle sales and service.
Carvana CoCarvana's dealership strategy boosts new-car sales and service revenue, with strong initial results.
AutoNation IncMentioned as a benchmark for parts/service margins, but no direct impact on AutoNation.
Caesars Entertainment Corporation
Stellantis NV