Interview Synopsis

Carvana - Q4 2022 update and demand outlook

  • Credit
  • Consumer
  • North America

Online used car retailer Carvana’s stock has fallen over 90% compared to this time last year. Third Bridge Forum spoke to a former executive at the company who told us that despite this, Carvana has “a good business model and [is] here to stay”.

Can the Carvana model succeed?

In the Interview, the specialist said that the secondhand car industry continues to face supply challenges. They also told us rising petrol prices are accelerating customer adoption of electric and hybrid vehicles, whilst there is also a growing demand for SUVs and trucks.

The specialist believes that Q4 2022 volumes could be “slightly more” vs Q4 2021. They said that the holiday season in the US coincides with greater sales and that there is still demand for secondhand cars. 

A recession is likely to affect the secondhand car industry and Carvana to a lesser extent, according to the specialist. Customers who struggle to get approved credit from a traditional dealership are more likely to be able to purchase a car from Carvana, we heard. However, the specialist said customers would have to pay 24% APR for their purchases. 

In the Interview, the specialist discussed different levers to reduce Carvana’s OPEX. Improving staff efficiency was mentioned by the specialist as one such lever, with the company having made staffing decisions based on short-term needs that are no longer sustainable. 

CarMax differentiates from Carvana by having a sales team and a longer returns policy, the specialist told us. We heard local dealerships moving more of their business online could also be a threat to Carvana. However, the specialist said Carvana is still faster in processing sales than local dealerships.

Over the next 12-18 months, the specialist said Carvana should look to cement partnerships with manufacturers to offer new vehicles to customers. The best case scenario for Carvana would be the company continuing to operate in every state they are in, according to the specialist. This was not the case earlier in the year, the specialist told us, with three locations closed in North Carolina for three months due to car title delays. 

Click here to access all the human insights in the Third Bridge Forum Interview, “Carvana- Q4 2022 update and demand outlook”.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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