NASHVILLE, Tenn. -

In pre-COVID times, a given year could yield upwards of 10 million vehicles sold at NAAA-member auto auctions.

That’s also about how many questions arose when Carvana announced a deal in February to acquire KAR Global’s ADESA auction business in the U.S.

(Well, at least in this reporter’s mind).

More than six months have passed since the announcement of that deal, which ultimately closed in May, and the go-forward picture of ADESA’s U.S operations is far clearer.

At the International Automotive Remarketers Alliance’s 2022 Summer Roundtable held here in mid-August, Carvana chief executive officer Ernie Garcia addressed some of the early concerns and questions about what the new ADESA would entail, as part of wide-ranging fireside chat with John Combs, ADESA’s vice president of commercial sales.

Tackling perhaps one of the most pressing boots-on-the-grounds concerns, Garcia said there are no plans to shut down any ADESA auctions.

And one way to think about how those ADESA auctions will operate under the Carvana umbrella is this: integrated capabilities, but separate business operations,  when it comes to tasks like reconditioning.

Garcia touched on this when discussing a question that Combs said ADESA had received early on from clients around reconditioning. If ADESA locations are reconditioning Carvana cars for retail, will those ADESA clients get the same level of service they had previously?

In essence, yes. 

“We want to try to integrate capabilities as much as possible. We want to try to keep the businesses as separate as we possibly can to minimize the number of places where you have to have all this overlap. And so, we will be keeping a lot of these functions pretty separate,” Garcia said. “Like a lot of the wholesale recon will be different from the retail recon.”

Garcia estimated that Carvana is currently bringing wholesale cars to 48 ADESA auctions. At those locations, the company has set aside a piece of land specifically to work Carvana wholesale vehicles, “and it's almost like we're interacting as if we're like a third party, sort of like a borrower of the land,” he said.

“We're like effectively paying rent for this land. And then we can operate pretty independently. And we'll continue to do that. The goal is for ADESA to keep running its business the exact way that it's been running its business, for Carvana to run its business the same way we've run our business, and then to utilize real estate as a place where we kind of overlap,” Garcia said. “And then, minimally, create capabilities between us that our optimal for our customers, but do as little work integrating as we possibly can, just because as we discussed earlier, integration is risk.”

How dealers have reacted

And then what about the dealers who traditionally have purchased from ADESA — will they be willing to buy from a company now owned by a competitor?

Garcia says “there has been a wide spectrum of reactions” from dealers, with some initially bowing out due to Carvana being a competitor

“And that's fine; that's their decision to make and we respect whatever decision people are going to make,” he said. “I think there's been a reaction by others that say, 'Hey, you have capabilities that maybe I don't have and are there interesting things we can do together?’”

Additionally, other dealers may be more concerned with obtaining inventory at the best price and/or selling them for the most money rather than concerning themselves with “what is a 1% market-share holder doing every day,” Garcia said.

Regardless, it’s the dealer’s choice to make and Carvana will respect that decision, he said.

“What I honestly do believe and hope that most people arrive at — and i think so far most people have arrived at this — is you always have to evaluate what are the gains from trade and what are costs to trade,” Garcia said. “And i think that the proof is, we're at a scale now where we're 1% of this market.

“I think that every dealer out there has 50 things that influence them every day more than 1%.”

Garcia anticipated some sort of dealer reaction going into the deal, but believed that “that there's more gains from trade and there's more interesting things that we can do together than there are ways in which we're going to benefit in a way that's ultimately going to cost any of our customers.”

So far, he said, that's largely how the process has gone, he said. Some customers and dealers left early on, but even some of those dealers have come back, Garcia said.

Will you use my data?

A topic that came up during this session, elsewhere at the IARA Roundtable and continues to crop up at seemingly every automotive conference is data.

In this particular instance, the conversation was about ADESA customers’ initial concerns about their own data: Would Carvana have access to that data after the deal closed, and would they use it?

“Please believe us: It would be a big mistake for us to do something that disadvantages our customers. And we know that. That's what a long-term focus is. Every relationship you have, with a partner, with a customer, if it's not better for both of you … it's not going to last,” Garcia said. “People are smart. They're going to figure it out. And you can't put people at a disadvantaged position for a long period of time.

“We would really, really not aim to do that. That will not be our goal,” he said, adding: “Most of the data that exists in an auction is purchasable data product anyway, from many sources inside the industry. So, I don't know that there's ways in which we would utilize that and really advantage us in any material way

“One of the big questions we had when we were contemplating all this was, is there going to be friction between us and our customers in a way that makes it so this doesn't work?” Garcia said. “Where we ultimately arrived is, there's going to be some perception of that, for sure, of fundamentally, that there shouldn't be that much of that, and we should do everything in our power to make sure that there isn't any of that, because we care about the long run.

“And in the end, truth wins. And so there may be some friction early on” in terms of customers perceiving conflicts, he said, “but then as we operate over time, and people learn that we're not taking advantage of whatever things we maybe could take advantage of — which again, i don't even know exactly what that would be — then they'll trust us and we'll move forward and we'll make progress together.

“We thought about that going into all this, and we know that it's in our interest to make sure that everyone's better off that interacts with us and that's what we will seek to do and I hope that we achieve it.”