Skip to main content

Carvana rivals rethink ADESA

Carvana-ADESA deal has automakers rethinking auction plans

Carvana's pending acquisition of ADESA U.S. has prompted some automakers and dealers to rethink or sever their relationship with the No. 2 U.S. auction house.

Carvana's pending acquisition of ADESA U.S. has prompted some automakers and dealers to rethink or sever their relationship with the No. 2 U.S. auction house.

Carvana's pending acquisition of ADESA U.S. has prompted some automakers and dealers to rethink or sever their relationship with the No. 2 U.S. auction house to avoid doing business with the used-vehicle retailer that's become a fast-rising competitor.

Carvana CEO Ernie Garcia last week acknowledged that a "small handful of both buyers and sellers" have opted — at least in the short term — to not do business with ADESA in light of the deal.

Lithia CEO Bryan DeBoer, during last week's first-quarter earnings call, said he believes seven manufacturers recently have pulled vehicles from ADESA. Automotive News confirmed that Toyota Fin- ancial Services chose to end its relationship with ADESA effective April 1, a spokesman said.

"The four ADESA auction sites we used were moved to Manheim," spokesman Vincent Bray, who said Toyota Financial routinely evaluates its auction footprint, wrote in an email. "Prior to the change, we informed our Toyota, Lexus and Mazda dealer partners of the transition."

Volkswagen had not reached a final decision on ADESA, a company spokesman told Automotive News. GM Financial was assessing its physical auction options to decide on its next steps, a spokeswoman said in an email, without saying whether the company had stopped or would stop using ADESA.

Garcia said Carvana has seen less movement away from ADESA than it was anticipating. It hasn't reached a level concerning to Carvana, he said, and the company remains excited about the acquisition, which it expects to close in May.

"We don't think that that's actually flowing through and impacting the results in a way that is noticeable as of yet," Garcia told analysts and investors during Carvana's first-quarter earnings call last week.

A spokeswoman for ADESA parent KAR Global declined to discuss any automakers' departures. A Manheim spokeswoman would not comment on whether that company had seen an influx of customers as a result, citing a policy of not discussing client relationships or speculating about competitors.

The majority of Hyundai's auction activity already goes through Manheim and a few of the bigger independent houses, a Hyundai spokesman said.

"Overall, it is too early to tell how dealer attendance and participation will change at ADESA locations due to the Carvana purchase," Michael Stewart, Hyundai Motor America's senior group manager of product public relations, said in an email.

Michael Baker, a senior retail analyst with D.A. Davidson Cos., said he expects that some dealers who prefer to use physical auctions will seek alternatives to Carvana-owned sites.

"In the past, ADESA was a service that they used," Baker said. "Now, ADESA is owned by their competitor."

The deal would give Carvana ownership of 56 ADESA sites across the U.S., totaling about 6.5 million square feet of buildings on more than 4,000 acres.

Carvana, which has 17 reconditioning and inspection centers nationwide, has said it wants ADESA's real estate in order to boost its capacity and put the company within reach of more consumers.

Adding the ADESA sites would nearly double the volume of vehicles Carvana can process to as many as 2 million vehicles a year, the company said. It expects to have annualized capacity of about 1.4 million vehicles by the end of 2022.

Carvana, which last week reported a first-quarter net loss of $506 million, said it expects to mostly finance the ADESA purchase through about $2.2 billion in unsecured notes.

The company also revealed plans to raise $1 billion in preferred stock and $1 billion in common stock. Carvana CFO Mark Jenkins told analysts and investors the additional $2 billion would be used to fund improvements to the ADESA sites and for "general corporate purposes."

Automakers and dealers leaving ADESA likely would be a setback for Carvana, but some analysts said the reconditioning capabilities it's gaining might outweigh those losses.

Getting Carvana closer to more would-be customers could reduce delivery costs per vehicle, Stephens Inc. analyst Daniel Imbro said.

"Once they make their investments, that is the real benefit, I think, of why they looked at this asset," Imbro told Automotive News.

Acquiring ADESA ultimately could aid Carvana in the long run as it hopes — but there's a long way to get to that point, said Baker, the D.A. Davidson analyst. Converting the 56 ADESA sites into reconditioning centers will take time and effort, he said.

"There's a lot of reconditioning, if you will, that they need to do ... to get them ready, to get them to where they need them to be," Baker said.

Still, he said, purchasing and improving the ADESA sites may be faster than Carvana continuing to build all of its own reconditioning centers from the ground up.

Larry P. Vellequette and Carly Schaffner contributed to this report.



from Section Page News - Automotive News https://ift.tt/OtoW31x
via IFTTT

Comments

Popular posts from this blog

The can of worms opened by Hamilton and Leclerc’s F1 US GP disqualifications

Having fallen just 2.2 seconds behind Austin race winner Max Verstappen, Mercedes racer Hamilton plus sixth-placed Leclerc were then thrown out for running with excessively worn floor planks.They had contravened the FIA Technical Regulations which states that the plank assembly measured at designated holes can only wear by 1mm down to 9mm across a weekend.With their rear skids deemed illegal, the ... Keep reading from Autosport.com - All - Stories https://ift.tt/OwNJ94p via IFTTT

Verstappen completes F1 practice clean sweep at Bahrain GP

Track temperatures at the start of the final one-hour practice session of the weekend were nearly hitting 50-degrees, which meant the teams opted to spend the first 10 minutes in the pits – with only Yuki Tsunoda completing an installation lap when the track went live. Valtteri Bottas ended the tedium after 10 minutes, eventually going straight out on the soft tyres for his first run ... Keep reading from Autosport.com - All - Stories https://ift.tt/3cs9TD1 via IFTTT

President’s Budget Proposes Selling Half of National Petroleum Reserve

- Following up on sales set in motion by the Department of Energy  at the end of the Obama administration, President Trump has proposed in his budget to begin selling oil from the  U.S. Strategic Petroleum Reserve next year. After a decade of domestic production increases brought about by the shale-drilling boom, the country’s reliance on imported oil has fallen, decreasing the need to maintain the  688-million-barrel, 141-day supply at its current level, the administration said. - The Strategic Petroleum Reserve (SPR)—the largest emergency petroleum supply in the world—is stored in four underground cavern complexes on the Gulf coasts of Louisiana and Texas. It was created in 1975 in response to the oil embargo by member nations in the Organization of Petroleum Exporting Countries (OPEC) in 1973–1974. In the years since, it has been used a handful of times to stabilize oil prices during emergencies—notably in 1991 during Operation Desert Storm and in 2005 after Hurricane Katrina. T