Former executive at Carvana Co
- Trends and developments in the used vehicle retail industry, focusing on Carvana (NYSE: CVNA)
- Volume and GPU (gross profit per unit) trends as rising interest rates push buyers to the sidelines
- Competitive positioning, focusing on CarMax (NYSE: KMX) as Carvana integrates its acquisition of Adesa
- Medium-to-long-term outlook
Could you share your up-to-date perspective on the used vehicle retail industry, pulling out 2-3 key trends or developments that you’ve been following?
Do US EV tax incentives apply to the used car market or are they limited to new EV sales?
Do you have any thoughts on how EVs might affect the used car business as they start to penetrate the car park further?
Would higher EV penetration impact the economics of Carvana’s business in the future?
Regarding buying vehicles from consumers, the [STC] sell to Carvana purchases as you labelled them, you highlighted a trend of Carvana out-paying everybody else. Is that practice continuing or are other operators keeping prices at a lower range? Are other operators matching Carvana to be competitive? Is there pressure on Carvana to come down to an industry level?
What pace has the industry been growing at? How much do you expect it to grow this year, next year and over the next 3-5 years?
Even if Carvana isn’t slowing down its expansion, are you seeing a slowdown in demand or activity in the industry as a whole?
It sounds as if you’re pretty optimistic about Carvana compared to the broader industry. Would you assess the company to be ahead, below or in line with the industry trajectory?
What is the current demand environment for used vehicles? What’s the relative health of the key drivers you’re looking at?
Can you talk about the latest GPU [gross profit per unit] trends in the used vehicle market?
What does a fall in used car prices mean for Carvana and others in the space? Is it just lower gross margins in the short term or are there other things to consider?
Do you think GPUs are likely to go below 2019 levels, given the fiscal situation and a potential recession?
How are you thinking about Carvana’s volumes through the rest of 2022 and into 2023?
Would you say volumes will be similar to Q4 2021 or will they be above or below that?
Can we draw any parallels to a previous recession or, given your experience and insight, how used car sales typically perform during a recession?
How do you think about how Carvana’s OPEX will trend? Are there any levers where costs can be cut? Are there areas where it’s going to stay the same or increase?
How do you expect the financing and insurance profit per unit to trend, at least on an industry level?
Do you think the Carvana model will ultimately work? Do you see peers like CarMax as better-positioned for a nationwide launch?
What do you think about Carvana’s competitors that operate on a franchise or local dealer network level? The franchise competitors, Lithia, Group 1 and AutoNation have been developing online offerings. Do you have any thoughts on how that’s coming along over time and how that might stack up?
What do you think about Carvana’s acquisition of Adesa in May 2022? You mentioned that Carvana has developed a relationship with Manheim in Chicago to help facilitate growth. What’s happened with the Manheim relationship post-acquisition?
Could you summarise your thoughts on the best and worst-case scenario for Carvana over the next 12-18 months?
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