Is Carvana going out of business? The ‘Amazon’ of cars tumbles

Caruana was once touted as the future of the car buying process. A customer can go online, view detailed photos of the car they want to buy, complete the online purchase, and then go to one of the company’s state-of-the-art car vending machines to purchase the car. Or customers can have the cars delivered to their doorstep. Carvana thrived during the pandemic, as buyers with pockets full of economic impact payments looked to take advantage of incredibly low interest rates and a contactless method of car buying. Unfortunately for Caruana, things have changed drastically since the start of the pandemic, causing its stock to plummet.

The plague created the perfect storm for Caravan’s success. People had extra cash on hand, low interest rates allowed people to get more for their money, and people wanted to buy a used car without actually visiting a dealership. As one of the first to offer an Amazon-styled way to buy a car, Caruana was in the right place at the right time and thrived.

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A black Hyundai Sonata sedan is being towed to a Caravan truck in Chicago.
the caravan

While the pandemic isn’t really behind us, Caruana doesn’t have the same happy news it once did. Used car prices are falling fast, especially luxury cars, which seem to fall for free, interest rates are high, and almost every dealership (including Carmax) offers some kind of way to buy a car online. Plus, there’s talk of a deficit, although with inflation, we’re practically already living in one. The sudden return to normal has caused Caruana stock to tank, as it is down nearly 97% from a year ago. On December 1, 2021, Caruana was trading at approximately $282, while the stock now sits at $8.23.

The massive 44% drop came shortly after Carvana released its quarterly results in early November. The company’s third-quarter results were dismal, as Carvana’s revenue fell 2.7% year over year. And the company’s net loss widened to $283 million, compared to $32 million in the third quarter last year, The Straits reports. For a company trying to grow, these numbers are a sign that the company is doing poorly, especially as used car sales continue to decline.

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If things don’t get worse for Caruana, the company recently announced that it will lay off 1,500 employees, or 8% of its workforce. This comes after the company cut 2,500 jobs in early May. In an email to employees, Caruana CEO Ernie Garcia told employees there were several factors contributing to the layoffs. “First, the economic environment faces strong headwinds and the near future is uncertain. This is especially true for fast-growing companies and businesses that sell expensive, often financed products where the purchasing decision is easy. Can be delayed with cars like,” said Garcia. As the CEO put it, Carvana “failed to accurately predict how this would play out and how it would affect our business.”

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It’s hard to say if Caruana will go out of business, but Morgan Stanley, via Business Insider, said the company’s stock price could fall to $1 as used car prices and sales fall in early November. has fallen into But with everything going on with the auto industry and the fact that the company is facing legal challenges related to registration and title issues with the vehicles it buys, Caruana looks like it has an uphill battle.

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