Majestic Research

The Daily Breeze

A Big Deal: Torrance Welcomes Latest CarMax Lot to the South Bay

By Muhammed El-Hasan
Published: June 22, 2007

CarMax Inc., the nation’s largest used-car retailer, plans to open a Torrance dealership in August that will be the South Bay’s second CarMax and second largest used-car dealership.

The South Bay’s largest seller of pre-owned vehicles is the Inglewood CarMax near LAX with more than 50,000 square feet of retail space, compared with the Torrance site with about 17,000 square feet.

The new CarMax is part of the Richmond, Va.-based company’s expansion in California.

The Greater Los Angeles region already has six of the firm’s dealerships. Torrance will be the seventh.

The Torrance store will have an informal opening on Aug. 1, with the grand opening three days later on a Saturday. The dealership, still being built, is at 18020 Hawthorne Blvd. That lot was vacated in 2004 by a Circuit City store that moved to Hawthorne.

“These kinds of businesses opening in the city of Torrance are critically important for the tax revenues they generate, which gives us the ability to offer the services to residents,” Mayor Frank Scotto said of CarMax.

Scotto said the city did not offer any incentives for the car seller to open in Torrance. He added that CarMax may not be the only dealerships coming to the city.

“We hope in the near future to attract a couple of others,” Scotto said. “We’re getting inquiries constantly.”

Scotto declined to divulge the names of interested dealers until an agreement is made.

CarMax is opening in Torrance because the city is a “highly visible, growing retail area,” company spokeswoman Elia Imler said in an e-mail exchange.

“We plan to open more stores in California in the next 5 to 10 years,” Imler said. “Opening in Torrance fits this growth strategy.”

Riverside, San Diego and Modesto will all get a new CarMax this fiscal year, Imler said.

With its large selection of used cars, no-haggle prices and extensive reconditioning of vehicles before they go on sale, CarMax often has a major effect on any market it enters, retail analyst John Tomlinson said.

No-strings car buyer

In addition, CarMax will buy a car shopper’s used vehicle regardless of whether the prospective buyer purchases anything from the dealership.

That constitutes an added draw for customers and allows CarMax to acquire higher quality used vehicles without competing with other dealers at auction, said Tomlinson, a senior director and senior analyst at Majestic Research in New York said. About half of CarMax’s inventory comes from vehicle auctions, he said.

“It’s a completely different experience,” Tomlinson said. “It’s definitely going to be taking business away from traditional new- and used-car dealers.”

Used-car specialist

Nationwide, CarMax has about a 3-percent share of the late-model used-vehicle market, Tomlinson said. That’s with only 80 used-car superstores in 38 markets.

Since the average retail price of a vehicle sold at CarMax is about $17,500, the new Torrance location would not compete against some of the more high-priced dealerships such as a seller of new BMWs, Tomlinson said.

Torrance alone has more than three dozen new- and used-vehicle dealerships.

Also, more than a dozen new- and used-car dealerships dot the stretch of Pacific Coast Highway and Sepulveda Boulevard running through Manhattan Beach, Hermosa Beach and Redondo Beach. The South Bay has other car sellers scattered throughout the region.

The new CarMax could tighten competition among many of these dealerships.

The public company did not divulge its specific investment for the Torrance store, but typically spends about $10 million to $15 million on a new site.

CarMax sells used vehicles that are usually 1-6 years old. Some locations also offer new cars such as the Inglewood site. The Torrance location will be strictly used vehicles, said Naim Sobhani, who will serve as general manager.

Sobhani said he will at first display about 300 sellable vehicles of various brands at the three-story site. There will be about 560 vehicle spaces. Some of the spaces will be reserved for parking for customers and employees.

Other spaces will be for vehicles that are being prepared for sale, Sobhani said.