Carvana Struggles with Dropping Used Car Demand

Car Dealer’s Troubling Q4, 2022 Results Announced

Tempe, Arizona-based vehicle trading business Carvana has declared its fourth quarter and entire 2022 year results – and the ultimate numbers are not inviting. Representing Q4 alone, it logged a net deficit of $806 million. As for the complete 2022, the pre-owned car retailer came up with a colossal loss of $1.6 billion. Sales in the fourth quarter arrived at $2.8 billion, signifying a 24% dip from Q4 2021. For the entire of 2022, Carvana took in revenue of $13.6 billion, a rise of 6.2% over the preceding year.

A sum of 86,977 vehicles were sold during Q4 2022, recording a 23% drop. In the fourth quarter, Carvana brought in a profit of $2,219 per vehicle, a decrease of 51% compared to the same period a year prior. For the entirety of last year, Carvana sold 412,296 vehicles, though this denotes a 3% slide in comparison to 2021.

Per car, its annual revenue was estimated to be $3,022, significantly less than the previous year’s figure of $1,515.

“Nothing worth doing is easy – and that includes building Carvana. We’ve been reminded of this again in 2022,” said Ernie Garcia, CEO and founder of Carvana. “It’s been a difficult period, but we’re ready to take it on. Over the next six months, we will be working to reduce our costs by an estimated $1 billion each year – and all without sacrificing the quality of our customer experiences.”

Carvana, which was founded a decade ago, is determined to revolutionize the way Americans buy and sell used cars. One of the company’s initiatives that has gained instant recognition is its “car vending machines”. In Q4, the retailer managed to reduce its inventory by approximately 27%, and it plans to keep up this trend during Q1 2023.

Despite its reputation, there is still a range of drawbacks for being an industry disruptor. All through 2022, several Carvana outlets were probed by government officials in Illinois, Michigan, and Florida, among other states, due to delays in titling, the purported failure in preserving odometer readouts, and the selling of a 2015 Volkswagen Tiguan to a Mainer which turned out to be a dud. This adverse advertising had a cumulative effect. Last month, Carvana was compelled to get rid of $4 billion worth of credits for the sake of their long-term endurance, with 1,500 jobs lost in November. In the same way, its stock cost has also dropped significantly.

2023 may be a turning point for Carvana, as the pre-owned vehicle market is no longer as feverish as it was in 2021 during the peak of the pandemic. Despite soaring costs of new cars that are only just coming down, 2023 could still potentially be successful by this moment next year.

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