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

Carvana was once heralded as the future of the car buying process. Buyers can go online, see pictures of the car they want to buy, complete the online purchase, and then visit one of the company’s popular car dealerships. to pick up the car. Or buyers can have the car delivered to their door. Carvana has continued during this pandemic, where consumers with small pockets through economic impact payments are looking to take advantage of the low interest rates and the contactless process to buy a car. Unfortunately for Carvana, things have changed a lot since the start of the pandemic, causing its product to fail.

The pandemic created the perfect storm for Carvana to succeed. People have extra cash on hand, low interest rates allow people to get more for their money, and people want to buy a used car without going to the dealership. Being one of the first to offer Amazon’s way of buying cars, Carvana was in the right place at the right time and grew.

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A black Hyundai Sonata sedan is being towed to Carvana in Chicago.

Although the epidemic is not behind us, Carvana does not have the same good news as it did in the past. Used car prices are falling fast, especially luxury cars, which seem to be falling for free, interest rates are high, and almost every dealership ( including Carmax) offer a variety of ways to buy cars online. In addition, there is the issue of recession, although inflation and sales, we often live together. The sudden way things have returned to normal has caused Carvana’s stock to collapse, with nearly 97% from a year ago. On December 1, 2021, Carvana was trading at nearly $282, while the stock currently sits at $8.23.

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The massive 44% drop came right after Carvana released its quarterly results in early November. The company’s third-quarter results were particularly bad, with Carvana’s revenue falling by 2.7% year-on-year. The company’s net loss increased to $283 million compared to $32 million in the third quarter of last year, reports The Street. For a company trying to grow, these numbers are a sign that the company is heading into trouble, especially as used car sales continue to decline.

If things couldn’t get worse for Carvana, the company recently announced that it will lay off 1,500 workers 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 employees there were a few reasons for 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 for businesses in -sold expensive products, often making money while the purchase decision can be delayed like a car,” said Garcia. As the CEO put it, Carvana “couldn’t accurately predict how all of this would play out and the impact it would have on our business.”

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It’s hard to say if Carvana will go out of business, but Morgan Stanley, via Business Insider, said that the company’s stock price could fall to $1 as car prices and sales fell at the beginning of November. But with everything going on in the car industry and the fact that the company is facing legal challenges from issues related to the registration and title of its vehicles, Carvana seems to have an uphill battle. .

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