Carvana CEO Ernie Garcia repeatedly points out the extreme fragmentation of the used-vehicle market. His oft-cited leading proof point? That the largest player in the space — CarMax — has just 2 percent of the market.
For Garcia, that means the door is wide open for other players, namely the online used-vehicle retailer he co-founded in 2012. Seven years later, Carvana, now a public company, is not yet profitable, but it's on pace to sell nearly $4 billion in used vehicles in 2019 and has a market capitalization approaching $11 billion.
And other entrepreneurs want in on the action.
After a first wave of used-vehicle startups launched early this decade, more new ventures are arriving, keen on upending different aspects of the market and grasping investor backing. Some are well-versed in auto retailing, while others are newer to the business. Established disruptors such as CarMax and Carvana have provided inspiration to some of them. The new wave of players all identify pain points or inefficiencies they are betting on exploiting.
The timing for these Web-based, used-vehicle ventures could be right, said Brad Erickson, senior analyst at investment bank Needham & Co.
"There's an opportunity for a few brands to make a name for themselves and do it efficiently in a way that physical car dealers cannot," Erickson told Automotive News.
Behind Erickson's view: Vehicle shoppers are now starting to get comfortable with the idea of buying a car online. That shift is still in the beginning stages, he said, but it will pick up as more young people comfortable with doing business online or through mobile apps buy cars.
Moreover, the market is huge. Cox Automotive estimates that 39.2 million used vehicles will be sold in the U.S. this year.