|Carvana faces the ultimate challenge in the new year|
A 98% drop in stock prices raises questions.
If a company reshuffles its staff twice a year, you have to wonder.
When a young company loses about $500 million each in three consecutive quarters, the question arises:
As we approach the end of this 2022, which has been a terrible, terrible, bad, very bad year for online used car dealer Carvana, CJ Moore is asking that fundamental question, and others surrounding it. I set out to ask the people of In this week’s front page article:
■ Is Carvana being swayed only because its business is focused on the most difficult consumer-facing parts of the auto industry?
■ Or do you have specific debt that is a bottleneck to growth, such as the processing of undeveloped titles?
■ Did the acquisition of ADESA’s physical auction business overextend the company?
It’s been a tough time across the board for used car retailers. Prices have been rising for most of the last year and are now falling sharply. It’s easy to get on the wrong side of this kind of trend. Other online used-car specialists Vroom and Shift Technologies have struggled. So is CarMax, and so is a group of public dealers in the used-car business.
As with this COVID economy, we live in exceptional times that may not fully reflect our long-term outlook.
But Carvana is a special case. That Super Bowl ad may not have been as derogatory as Bloom’s, but it was also insulting: Carvana positions itself as the Tesla of retail. It’s a disruptor meant to wipe out the clock of fat, stupid, and happy incumbents. Therefore, the collapse of that stock should stimulate a certain amount of schadenfreude (joy of others’ misfortune) within established retail networks.
Still, Carvana’s success cannot be ignored. The company has demonstrated that consumers value the convenience of online shopping. Even if Carvana failed (or went through a restructuring under the protection of bankruptcy court), it definitely changed the course of the industry. All dealers needed to step up their digital retail game. Either compete with Carvana CEO Ernie Garcia or cash out and move to Florida.
As CJ’s report shows, Carvana isn’t dead yet. I have cash. I have land that I can sell for cash. Carvana’s risk of bankruptcy in the first half of 2023 is pretty slim, even if his biggest creditors strike a deal.
This year will be pivotal for this emerging retailer with volatile inventory. Its fate will be determined by its own actions and the impact of the larger economy on consumer spending and credit availability.
My best prediction for 2023: CJ will write more about Carvana.
— Jamie Butters