Imagine dropping a coin into a vending machine and instead of a can of soda or a bag of chips, a full-size car rolls out.
That’s the concept behind a proposed eight-level, glass-and-steel “car vending machine” proposed for a vacant parcel on the west side of Interstate 15 in Escondido.
The project is proposed by Carvana Inc., an online used car seller that is expanding rapidly across the United States. The proposed Escondido tower, at Hale Avenue and Tulip Street at the site of a former meat packing plant, would be the company’s first in San Diego County.
The company has previously opened car-vending machines in Westminster and Ontario in California, and its 25th vending machine opened in August in Louisville, Kentucky. In addition, the company offers home delivery of vehicles in 261 markets across the U.S.
A hearing on the proposal is set for the Escondido Planning Commission on Tuesday, with the project tentatively scheduled for consideration by the City Council on Sept. 23. City staff is recommending approval of the project.
The proposed 75-foot-tall Escondido tower would hold 32 cars on eight levels, said Mike Strong, director of community development with the city. The project is planned for a 1.85-acre triangular lot that will be visible from the nearby freeway.
“What is attractive about this (business) model is they are using less space on their site for storage of vehicles” than a typical dealership, said Strong.
A representative of Carvana declined to comment for this story. According to the company’s web site, customers can search for and examine cars in Carvana’s online inventory from wherever they happen to be, using a computer or mobile device. All aspects of the transaction, including financing and signing contracts, are handled online.
Customers then have the option of having their vehicle delivered to their home, or going to a vending machine site to pick it up. The company also buys used vehicles for cash or as trade-ins. The web site says customers have seven days after purchasing a car to decide if they want to keep or return it. During that time, they can drive it or even bring it to their mechanic to be checked out.
If customers opt to pick up their car, they make an appointment to visit a vending machine, where they will receive an oversized, commemorative coin that activates the delivery system. They can then watch their car descend through the tower, said the web site.
Carvana, founded in 2013, was the first company to go 100 percent online to sell used vehicles, said Doug Arthur, an analyst with Connecticut-based Huber Research Partners. The company enjoyed rapid growth for the past several years, which slowed down earlier this year when the pandemic struck. However, the company rebounded quickly due to its “touchless” model for selling cars, Arthur said.
“In a shutdown world they found a new source of demand, which led to a greater adoption of their model than they ever saw before,” Arthur said. Carvana is sometimes called the “Amazon of used cars,” he said.
The company reported nearly $4 billion in revenue in 2019, more than doubling its 2018 revenue of $1.9 billion, according to Carvana’s annual report.
Even brick-and-mortar retailers are expanding their online presence due to the pandemic, said Arthur, but Carvana is “the clear leader by far” for online used-car sales.
“The car vending machines are kind of a gimmick but they provide a lot of advertising and marketing for the company,” Arthur said.
While the company has enjoyed strong revenue growth and is favored by investors and consumers, the company has not yet achieved profitability, Arthur said.
“The profitability of the model remains a question mark,” he said.
If approved, the Carvana vending machine would likely dispense its first cars in late 2021 or early 2022, Strong said. It would add to the roster of some 57 new and used vehicle dealerships in Escondido anchored by the Escondido Auto Park. Car sales are an important source of sales tax revenue for the city, bringing in an estimated $8.5 million annually, said Strong.
“The marketplace for used car sales is pretty strong and probably will be for some time,” Strong said. “I’m guessing they will be successful.”
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