A US used car retailer that allows customers to buy cars online and pick them up from towers resembling giant vending machines has, according to reports, approached investment banks for an initial public offering.
The company, Carvana, has supposedly hired Wells Fargo & Co and Bank of America Corp to lead its IPO, with a view to going public before the end of the financial year at a valuation of more than US$2 billion.
Consumers are growing more comfortable buying vehicles via the internet. The share price of TrueCar, which matches buyers with Dealers online, has risen 150 per cent in the last year.
Carvana sells cars through its website and operates automated towers that store cars in US cities, including Austin and Dallas in Texas and Nashville, Tennessee.
Customers buy cars online and either have them delivered or pick them up from the ‘vending machine’ towers using a special coin. Carvana also provides auto financing.
The company reported revenue of US$140 million in 2015 and projected revenue of more than US$350 million in 2016. It has raised almost US$500 million; however the unnamed sources say it is not yet profitable.
Carvana is one of several US companies attempting to disrupt the traditional dealership model of used car retailing. Another such company, the online car marketplace Beepi, went out of business earlier this year.
In January, Ally Financial Inc announced it would finance up to US$600 million of Carvana’s customers’ loans. One of Carvana’s backers is DriveTime Automotive Group, a network of used-car dealerships and car refurbishment centres.