Whether traditional retailers are fans or foes of the Carvana business model, consumers are gravitating towards this buying experience and other players are jumping on the bandwagon. In 2018, Carvana was reported as the fastest growing used car dealer in the United States. Since then they have increasingly continued their growth across the country with used car sales soaring. If Carvana continues to perform as they have, they will surpass all other used car retailers like Off Lease Only and CarMax, and start cutting into the traditional retailers used car market share and most importantly - profitability.
The assumption during 2020 as the pandemic started to force people to stay home is that Carvana would see incredible growth because their business model was perfectly suited for the temporary life pause the world went through. The stock market clearly agreed and if you invested in Carvana (NYSE: CVNA) in January of 2020 you would be up almost 250% at the time of this writing. However, what does the actual sales data show? Did Carvana sales see explosive growth like its stock price? Are they an “existential threat” to brick and mortar car sales? Are they poised to be the Amazon of car sales and do to retail automotive what Amazon did to malls? Let’s see what the data says...
The graph above shows Carvana growth in 14 states that had a Carvana presence and clear sales registration data from the respective motor vehicle departments as of January 2020. The left Y axis shows percentage of total used vehicle sales for dealerships and the right Y axis for Carvana. From January 2020 to April 2021 Carvana went from .63% of total sales to 1.22%. Carvana’s average market share growth in 2020 was .05% per month with more significant growth step ups in August (+.21%) and November (+.27%).
In 2021 Carvana’s average monthly market share growth rate increased to .07%. Maintaining this growth puts Carvana at 1.78% of total used vehicle sales by the end of 2021. Assuming the trend is maintained and the rate of monthly sales growth will step up at least by .02% per year Carvana will surpass CarMax by the middle of 2023 and will be responsible for 5% of the total used vehicle sales market by the middle of 2024.
In Part 2 of this blog, we'll dive into a few top-selling States to see how Dealerships are matching up against Carvana.
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