Carvana Seeks Growth of Its Inventory, as Pandemic Causes Used Car Contraction
As other used car retail outfits like Shift go public in an attempt to grow their number of stores and break into the (lucrative?) used-only dealership market, established player Carvana has a different issue on its hands: There just aren’t enough used cars to buy these days.
The 2020 pandemic has restricted the supply of used cars. Consumers work from home, cancel or curtail time away and vacations, and spend money on their homes instead of that shiny new whip. Hey, those used rides are fine if they largely sit in the garage.
It’s created a problem for Carvana, which needs a lot of used cars to make its business function properly – especially as it’s been growing rapidly. New additions to the Carvana portfolio include inspection/reconditioning centers outside Columbus, Ohio, and Orlando, Florida. The company has a total of 10 such centers nationally, and by end of the year, there should be 11 in operation. In Q3 of 2020, Carvana sourced more cars than it sold, but it still wasn’t enough to fill the lots.
Carvana has grown retail sales and revenue this year but is still losing money overall. In its latest shareholder call, the company reported a 39 percent increase in Q3 sales over Q2, to 64,414 cars. Revenue was also up 41 percent, to $1.54 billion. Overall though, the company still experienced a net loss of $17.7 million. That figure was considerably better than the pre-pandemic time (remember that?) of Q3 2019 when there was a net loss of $92.2 million.
Spurned by the growth operational scale, investors are also focused on Carvana’s promising increases in profitability. At the start of 2020, the company’s stock was worth $93.81 a share, but at market close on October 30th shares stood at $185.26.
With the national supply of used cars at a low point, dealers are eager for that trade-in and will pay top dollar. But that means used car shoppers are looking at inflated prices across the board. It might be the time to stretch the life on that jalopy a bit longer, much to Carvana’s chagrin.
Interested in lots of cars and their various historical contexts. Writing things for TTAC since late 2016 from a home base in Cincinnati, Ohio. You can find me on Twitter @CoreyLewis86, and I also contribute at Forbes Wheels.
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