Carvana, ADESA, ACV, & Wholesale Auto Auctions

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Last month, Carvana acquired ADESA, the second largest wholesale auto auction business in the US, for $2.2bn. Carvana is debt-financing $3.3bn for the acquisition and $1bn incremental capex to add IRC capabilities to the 56 ADESA sites. This acquisition places Carvana within 100 miles from 78% of the US population.

We believe this transaction not only accelerates Carvana’s retail growth trajectory, but could also fundamentally restructure the wholesale auto market.

We share our thinking below which is based on multiple executive interviews across the industry and a recent investor dialogue on CVNA vs KMX:

  1. Investor Dialogue: Carvana vs CarMax
  2. ACV Auctions & US Auto Wholesale Market
  3. Carvana, KAR Auction, & The Used Car Ecosystem
  4. Vroom, Carvana, & Optimising Vertical Integration
  5. CarMax: Competing with Carvana

The acquisition of ADESA gives CVNA two strategic benefits: a more efficient logistics network and potential access to fleet-managed inventory.

A More Efficient Logistics Network

After listening to Ernie Garcia, it’s clear every decision at Carvana is focused on improving the retail customer experience. The ADESA acquisition is no different; CVNA adds ~2m units of IRC capacity and is within 200 miles of 94% of the US population with ADESA's network.

The more IRC’s, the closer CVNA is to the end customer, the shorter the delivery time and the better the customer experience.

Source: Carvana, 2022Source: Carvana, 2022

Also, the denser the IRC network, the better the unit economics. CVNA estimates $750 of cost savings per unit sold within 200 miles of the customer relative to the average shipping distance.

Source: CarvanaSource: Carvana

A denser logistics infrastructure drives improvements in four areas that improve CVNA's unit economics:

  1. Lower inbound transportation costs
  2. Quicker IRC turnaround times
  3. Lower outbound transportation costs
  4. Higher sales conversion
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