CarMax officials said Nissan Motor Corp. U.S.A. will grant it franchises. Nissan and CarMax are both struggling to find their footing in a shifting auto retail world.
Nissans will be sold at a CarMax superstore in Carson, Calif., that is scheduled to open next spring. Other CarMax-operated Nissan stores will be named later.
This is the second such agreement CarMax has reached with a car company. The Richmond, Va., subsidiary of home electronics retail giant Circuit City Stores Inc., sells new Chrysler-Plym-outh-Jeep-Eagle products at two At-lanta-area CarMax superstores.
Analysts say the agreement could benefit both companies by giving CarMax quality vehicles to sell and an additional revenue source. Nissan aligns itself with a sophisticated retailer with national ambitions.
Both companies could use a lift. CarMax announced the Nissan agreement on Wednesday, May 6, the same day it told analysts its April sales fell below expectations and same-store sales were off 9 percent. Nissan is trying to stem its own sliding sales and market share.
'It's kind of a marriage of convenience and necessity,' said George Hoffer, an economics professor at Virginia Commonwealth University in Richmond.
CarMax has agreed to comply with the retail policy Nissan developed in January for publicly owned dealer groups and other retail consolidators. The policy limits large public and private dealership groups to a maximum of 5 percent of Nissan segment registrations nationally or 20 percent in any market.
Nissan spokeswoman Deborah Sanchez Fair said other consolidators have signed such agreements with Nissan: Asbury Automotive Group, Group 1 Automotive Inc., Lithia Motors Inc. and United Auto Group Inc.
In setting limits on public consolidators, Nissan followed companies such as American Honda Motor Co. Inc. and Toyota Motor Sales U.S.A. Inc.
Republic Industries Inc. has refused to sign the Nissan agreement and Nissan has sued Republic in federal court in California. Honda also is battling Republic in court in several states.
FIVE STARS IN GEORGIA
Since it acquired a Chrysler-Plymouth-Jeep-Eagle franchise in 1995 in Norcross, Ga., CarMax has learned a lot about the new-car business. After a rocky start, CarMax's two Atlanta-area dealerships in March won Chrysler's Five Star customer service rating.
CarMax, which operates 19 used-car superstores, has said it wants to have at least 25 new-car dealerships and 80 to 90 superstores by 2001. It eventually wants 250 locations.
W. Austin Ligon, CarMax president, said Wednesday, May 6, that CarMax still believes in the viability of the used-vehicle business as a stand-alone enterprise, but wants to diversify: 'We think it's good to have some balance.'
CarMax uses no-haggle pricing at its stores, and that system will be carried over at any Nissan stores it opens.
Analysts' views of the agreement were mixed.
'I would have preferred to see them (CarMax) strike an arrangement with a maker whose cars are a little more popular in the market right now,' said Tom Thomson, an analyst for Wheat First Union, an investment banking and research firm in Richmond.'But I see it as a positive for both companies. Look for CarMax to strike more alliances down the road.'
Jeremy Anwyl, president of Marketec Systems Inc. in Santa Ana, Calif., said: 'This is not something Honda or Toyota would consider doing, but for Nissan it's an opportunity to get a pretty strong retailer. It could be a pretty significant move.'
One of CarMax's Los Angeles-area competitors will be Republic's Torrance Nissan, part of the Southern California Auto Group.