Key Moments
- Carvana’s new car retail initiative now reaches up to half of the U.S. population through just seven Stellantis-brand dealerships.
- BTIG estimates new car gross profit per unit at $5,500 to $7,500, including $1,500 to $2,000 from parts and service.
- New vehicles are expected to account for less than 10% of Carvana’s total units and to dilute company-wide gross profit per unit by under 3%.
Carvana Scales New-Car Offering With Limited Physical Footprint
Investing.com — Carvana has significantly widened its presence in the new car segment, now serving up to half of the U.S. population using only seven Chrysler, Dodge, Jeep, and Ram dealerships, according to a Friday research note from BTIG.
The company introduced its new car retail concept in mid-June at a dealership in Dallas, Texas, and has since added a dedicated new car filter on carvana.com. In BTIG’s review of 16 major U.S. metropolitan areas, 15 showed available new vehicle inventory with free shipping.
BTIG highlighted that Carvana’s logistics infrastructure enables this broad reach with just seven stores, a level of coverage that would typically require between 100 and 150 conventional dealerships.
Constraints From Stellantis and Market Structure
The firm also pointed to notable limitations on the expansion strategy. Stellantis (NYSE:STLA) controls only 8% of the new vehicle market, and the automaker has placed caps on how many dealerships Carvana is allowed to acquire during any rolling 12-month period. In addition, there are unresolved issues around selling vehicles to customers who reside within other dealers’ Primary Market Areas.
Demand Dynamics: Converting Used Shoppers to New Buyers
Carvana’s internal metrics indicate that around 75% of new car transactions come from shoppers who initially searched for used vehicles. BTIG interpreted this as evidence that the company is enlarging the overall market rather than simply taking share from existing new car sellers.
Profitability Outlook and Financial Impact
BTIG estimated that new car gross profit per unit falls in a range of $5,500 to $7,500. Of that total, an estimated $1,500 to $2,000 is attributed to parts and service operations associated with the dealerships.
The firm expects new vehicles to constitute less than 10% of Carvana’s total units even under a robust volume scenario. On that basis, BTIG projects that the addition of new car sales will be slightly dilutive to the company’s overall gross profit per unit, by less than 3%.
| Metric | BTIG Estimate / Observation |
|---|---|
| Number of Stellantis-brand dealerships used | 7 |
| U.S. population coverage | Up to half of the U.S. population |
| Traditional dealerships needed for comparable reach | 100 to 150 |
| Stellantis share of new car market | 8% |
| Share of new car buyers who began with used searches | Approximately 75% |
| New car gross profit per unit | $5,500 – $7,500 |
| Parts and service contribution per new unit | $1,500 – $2,000 |
| New cars as share of total units (high volume scenario) | Less than 10% |
| Expected dilution to company-wide GPU | Less than 3% |
Strategic Benefits Beyond New Vehicle Sales
BTIG stated that owning the dealerships offers several strategic benefits for Carvana. The stores provide a steady pipeline of used vehicles, generate additional cash flow through parts and service operations, and give the company a physical consumer touchpoint that can help stimulate future demand for used cars.
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