Buy Carvana cars from the public

The car is dead? Long live the car!

If there's one thing Emma Fitzsimmons doesn't like, it's cars. The constant search for a parking space, the traffic jam in the metropolis of New York City: "Anyone who knows me knows how much I have always resisted having my own car," writes the New York Times reporter on Twitter. In the past few weeks, however, she had been brooding. With two small children, she is afraid of being infected with the corona virus in local public transport.

At the end of April it was therefore clear: "We are going to buy a used car." What led to a drastic slump in sales a few weeks ago is now the glimmer of hope for an entire industry: The corona virus could bring the car an unexpected revival.

"People want security, protection and control," says John Kiser from the market research company Ipsos, which examined the buying behavior of thousands of people during the Corona crisis. Many of them stated that they felt better protected from the pathogen in the car than in the bus or subway. The respondents also expressed the desire to be able to escape their own walls and use the car for excursions. At the same time, many car brands enticed with significant discounts, which also promotes the desire to buy. "The pandemic could definitely help the car make a comeback," says Kiser.

A used car, not a new one

Used cars in particular are very popular in the wake of the crisis. The share of the online used car dealer Carvana was able to gain more than 80 percent in the last three months. In April alone, the platform's sales figures rose by a third compared to the same period last year. The big US automakers - Ford, GM and Fiat-Chrysler - on the other hand, even recorded a 30 percent drop in sales in May.

Experts therefore believe above all in the potential of second-hand cars. "We consider used cars to have significantly greater opportunities than trading in new cars," says CFRA analyst Garrett Nelson. Not only is the used car market in many countries significantly larger than that for new cars. The Corona crisis added: "Given the financial difficulties, few people can currently afford a new car".

Growth in used cars higher than in the new car market

It is not without reason that another used car dealer is now going public. The online trading platform Vroom made its trading debut on the New York technology exchange Nasdaq on Tuesday. Within a few hours, the share price doubled from $ 22 to almost $ 48. The car broker raised $ 500 million on the first trading day. The company, which sold almost 19,000 used cars last year, has not made a profit since it was founded. The market capitalization jumped thanks to the IPO - and high demand - nevertheless to 2.5 billion dollars.

"Hope" from China

The example of China, on the other hand, shows that new cars definitely have a chance. Vehicle sales there rose rapidly in the wake of the economic recovery. In February, according to the Chinese car association CPCA, sales had plummeted by 80 percent. In May, on the other hand, sales increased by two percent compared to the previous year. The streets have long been full of cars again, now that many Chinese are back to work. Analyzes by BloombergNEF show that there are already more cars driving in the megacities of Beijing, Shanghai and Guangzhou than the average for last year. Local public transport, on the other hand, has not even recovered halfway.

"The example of China is currently giving the industry hope," says Stefan Bratzel, head of the Center of Automotive Management (CAM). German carmakers in particular could slowly breathe a sigh of relief. Unlike their French or American competitors, they are much more present in China. BMW and Daimler, for example, sell a quarter of their cars in the People's Republic. VW even sells 40 percent of its new cars in China. The Wolfsburg-based company was able to score points there even during the crisis. Not only did Volkswagen gain significant market share. "Despite the pandemic, VW also sold more cars in China in April than in the same period last year," says CAM boss Bratzel.

Expensive cars - German sports cars for export

However, the US financial services provider CRFA Research warns against viewing the recovery of the Chinese auto market as a blueprint for the western market. China is still considered to be underpowered, while the demand for cars in the USA, Germany and Europe has long been saturated. There are just 173 cars for every 1,000 inhabitants in China, according to the vehicle registration office there. The further sales potential is correspondingly large. In Germany there are already 701 vehicles for every 1,000 inhabitants, says the Federal Motor Transport Authority. In the USA there are as many as 837.

"Class beats mass"

The German market in particular is far from the level of earlier times. This is shown by the current registration figures from May: Compared to the same period last year, new registrations fell by around 50 percent to 168,000 vehicles. In the USA the minus is only 29 percent. Experts suspect that the premium segment alone is likely to experience above-average growth in all three markets. In China, for example, sales of luxury cars rose 28 percent in May. In the USA, on the other hand, pickup trucks and luxury vehicles are in demand like never before. In Germany, too, you can see increasing sales of the Porsche 911 and the Mercedes S-Class.

All in all, however, the market will only slowly fight its way back, says CAM boss Bratzel. The expert does not believe in a comeback of the car. "We will experience a small renaissance," says Bratzel. In view of increasing mobility problems such as traffic jams and decreasing parking space, however, as the corona pandemic leveled off, cars would increasingly disappear again from the cities of the world. However, he sees a slight upward trend until the end of the year, especially in the expensive premium segment. In crises, according to Bratzel, the following always applies: "Quality beats mass".

  • Get out of the car and get on your bike

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  • Get out of the car and get on your bike

    It all started with the trolley

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  • Get out of the car and get on your bike

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  • Get out of the car and get on your bike

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    Mobile sales booth

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    Peaceful coexistence

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    Author: Suzanne Cords