With billions in capital raised and valuations in some cases eclipsing those of public dealership groups, online used-vehicle startups appear ready to gobble up market share. Rapid growth by Carvana and other online players has created one of the most-watched situations in auto retailing.
With 40 million used vehicles typically sold annually in the U.S., the highly fragmented market is often portrayed as big enough for newcomers and traditional players to grow. But rivalry and tension among them are real. The upstarts often poke at traditional competitors in their marketing, making dealers bristle. Vroom's Super Bowl ad last week depicting a dealership experience as literal torture is the most recent case in point.
Most vulnerable appear to be the smallest dealers. While large dealership groups have the resources to respond and compete head-on in the digital space, others may need to find more creative solutions — possibly including cooperation with the upstarts — to adapt and survive.