Is Carvana going out of business? The ‘Amazon’ of cars tumbles

Carvana was once touted as the future of the car buying process. Buyers could go online, view detailed pictures of the car they wanted to buy, complete the purchase online, and then visit one of the company’s trendy car vending machines to pick up the vehicle. Or buyers could have the car shipped to their doorstep. Carvana was booming during the pandemic, as shoppers with pockets full of economic impact payments looked to take advantage of incredibly low interest rates and a contactless way of buying a car. Unfortunately for Caravana, things have changed drastically since the start of the pandemic, causing its stock to plummet.

The pandemic created the perfect storm for Caravana’s success. People had extra cash on hand, low interest rates allowed people to get a lot more for their money, and people wanted to buy a used car without actually going to a dealership. Being one of the first to offer an Amazon-style way to buy a vehicle, Carvana was in the right place at the right time and thrived.

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Black Hyundai Sonata sedan being pulled over a Caravan truck in Chicago.
caravan

While the pandemic is not behind us, Caravana is not as rich in news stories as it once was. Used car prices are falling precipitously, especially luxury vehicles, which appear to be in free fall, interest rates are high, and nearly every dealership (including CarMax) offers some way to buy a car online. Also, there is talk of a recession, although with inflation, we are practically living in one already. The way things got back to normal, Caravana’s stock tanked as it is down almost 97% from a year ago. Carvana was trading at approximately $282 on December 1, 2021, while the stock now sits at $8.23.

The big 44% drop came right after Caravana released its quarterly results in early November. The company’s third-quarter results were underwhelming, as Carvana’s revenue fell 2.7% year-over-year. And the company’s net loss widened to $283 million compared to $32 million in last year’s third quarter, The Street reports. For a company that is trying to grow, these figures are a sign that the company is headed into bad shape, especially as used car sales continue to decline.

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If things couldn’t get any worse for Carvana, the company recently announced that it would be laying off 1,500 employees, or 8% of its workforce. This comes after the company cut 2,500 jobs earlier this May. In an email to employees, Carvana CEO Ernie Garcia told workers there were a few factors driving the layoffs. “The first is that the economic environment continues to face headwinds and the near future is uncertain. This is especially true for fast-growing companies and businesses that sell expensive, often financed products where purchase decisions can easily be delayed such as cars,” Garcia said. As CEO Carvana “It failed to accurately predict how this would all play out and the impact it would have on our business.”

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It’s hard to say when Carvana will go out of business, but Morgan Stanley, via Business Insider, said in early November that the company’s share price could drop to $1 due to declining used car prices and sales. . But with all that is going on with the auto industry and the fact that the company is facing legal challenges from issues related to registration and title of vehicles purchased, Carvana looks like it is going to have an uphill battle.

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