CarMax Group will expand further into the new-car market by adding Mitsubishi franchises at two CarMax used-car superstores in the Washington-Baltimore area.
CarMax believes the deal with Mitsubishi Motor Sales of America Inc., announced Tuesday, Nov. 3, and similar agreements with Toyota Motor Sales U.S.A. Inc. and Nissan Motor Corp. U.S.A. earlier this year, will boost CarMax's lagging vehicle sales.
The company has blamed a booming new-car market - aided by manufacturer incentives - for CarMax's lower-than-expected used-car sales.
For Mitsubishi, the deal will strengthen its position in an area of the country where it is under-represented.
CarMax will begin selling new Mitsubishi vehicles at its year-old superstore in Laurel, Md., in December. In early 1999 it will add a Mitsubishi franchise at its superstore in Dulles, Va., which opened in September.
Odis Reid, Mitsubishi vice president of business development, said each outlet will sell between 600 and 800 new Mitsubishi cars and sport-utilities a year. CarMax also will service Mitsubishi vehicles.
'We hope to be shipping product to them within the next few weeks,' Reid said.
MORE NEW CARS
Although CarMax, a subsidiary of Circuit City Stores Inc., remains focused on used-car sales at its 24 superstores, CarMax President Austin Ligon sees new cars becoming at least one-third of the company's business.
'We'd be quite pleased to have a new-car franchise at every superstore,' he said.
Because of manufacturer preferences and state franchise laws, the CarMax president said only about one-third of its superstores eventually will have new-car franchises. As a result, CarMax also will operate stand-alone new-car dealerships near its superstores, he said.
Richmond, Va.-based CarMax is buying a stand-alone Toyota dealership in Laurel from Laurel Automotive Group and Mauro Auto Mall, a 10-franchise outlet in Kenosha, Wis. The company also is acquiring Nissan of Greenville in Greenville, S.C., and a new Nissan point in Carson, Calif. Both Nissan franchises will be integrated into upcoming CarMax superstores in those cities.
The company also has Chrysler franchises at its two superstores in the Atlanta area.
Ligon said CarMax will limit itself to one new-car brand per superstore. Ligon's goal is to be the No. 1 dealer for each brand in those local markets.
'We're particularly enthusiastic about Mitsubishi, because we think they have a strong product line,' Ligon said.
New-car sales will give CarMax balance, Ligon said. For example, the current strength of the new-car market will help the company offset a weaker used-car market.
In addition, strong floor traffic at superstores such as the one in Laurel will only help new-car sales, Ligon said. CarMax claims the Laurel superstore is the top-performing used-car retail outlet in the United States, selling about 10,000 vehicles in a 12-month period.
Mitsubishi had offered the two new franchise points to Mitsubishi dealers in the Washington-Baltimore area, but all declined. The company then turned to CarMax.
CarMax has proved to be 'a customer focused company,' Reid said.
Reid thinks CarMax's new-car strategy fits into Mitsubishi's plans as the car company tries to bolster its dealer base in other markets. Reid said there are areas of the country where Mitsubishi dealers are unwilling or unable to step up their efforts, although he would not disclose where.
Mitsubishi also is happy with CarMax's goal of having one new-car brand per superstore. Said Reid: 'We do not want to share CarMax's showroom with another new-car franchise.'