Tesco moves into the online second hand car business, with the launch of Tesco Cars.
Tesco (LSE: TSCO) has come a long way since the days when it was just a supermarket selling groceries. It has moved into clothing, petrol, pharmacy, banking and insurance, and even buying up old gold. But what next?
Second hand cars, would you believe?
On Sunday, Tesco launched the Tesco Cars website, offering RAC-inspected cars for sale at prices that it hopes will be up to 20% cheaper than existing forecourt prices, due to Tesco's lower overheads. The plan is that the cars will be delivered directly from seller to buyer, with no showrooms, and no sales commissions, etc.
The move was on the cards since Tesco acquired a large minority holding in the online car dealership Carsite, with options to extend its ownership further.
The chairman of the new venture, which hopes to tap into the UK's £24bn annual second hand car market, will be Sir Trevor Chinn, a veteran of the motor industry who also has a stake in Tesco Cars.
How does it work?
The new site will offer up to 3,000 cars a week, mostly sourced from hire fleets and the leasing business. If you like what you see and buy one, you can pick it up at a handover centre at Longbridge, or for a fee it can be delivered to your door.
You'll get a 7 day money-back guarantee. And you'll get clubcard points too -- up to 2,000 of them.
Though buyers will not be able to go and check the cars before they buy them, the RAC inspection report will be available, together with a test-drive video of the car (though it is unclear whether that will include a shot of an RAC inspector kicking the tires, scratching his chin, and going "Hmmm").
Perhaps ironically, Tesco has also recently embarked on a plan to cut its carbon emissions, part of which involves persuading its suppliers to reduce the carbon footprints of the products they sell.
There won't be any trade-ins or private sales available through Tesco Cars, and that, added to the inability to inspect the cars personally, will restrict the segment of the market that can be covered.
But with Tesco offering banking and insurance, the possibility of borrowing the cash and getting an insured care delivered to you, all without leaving your computer desk, must surely appeal.
Would you buy a second hand car this way? Or would this latest venture encourage you to buy Tesco shares (which are up slightly at the time of writing)? And what does it mean for shares in car dealers such as Pendragon (LSE: PDG) and Lookers (LSE: LOOK)? Do tell us, below.
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> The Motley Fool owns shares in Tesco.