In the first quarter 2022, the net loss at online car dealer was more than $500 million.
Carvana’s first quarter in 2022 wasn’t a great one. Although the online used car retailer is best known for its large automotive vending machines and other features, 12 percent of its employees are being laid off right now. This equates to 2,500 job losses and comes amid a net loss of $506 millions in Q1 2022. Carvana spent $2.2 billion. We’ll talk about that in a moment.
What is the reason for the net loss The company sent investors a letter mentioning the skyrocketing prices of used cars and higher interest rates as well as disruptions in Carvana’s reconditioning network and logistics system. The company also mentions COVID-19-related issues, but details are not provided. The company’s revenue was $3.49 Billion, which is a 56 percent increase over the first quarter 2021. Curiously, Carvana sold 14 percent more cars in the first quarter of 2019, 105,185. Profit per car is however down $823
Ernie Garcia, Carvana CEO, said that Q1 was an exceptional environment. Ernie Garcia, Carvana CEO, stated that Omicron, high used car prices, rapid changes of interest rates and other macro factors had a negative impact on Carvana as well as the entire used vehicle industry. These macro factors are temporary and we remain focused on providing the best customer experience possible. We are thrilled to announce ADESA US as part of our goal to deliver even better experiences to customers through a wider selection, faster delivery times and greater value.
This brings us to the second part of the report. It might seem odd for a company that has just eliminated 2,500 jobs. Carvana announced that it had acquired ADESA, a vehicle auction company, for $2.2 billion (yes billion) on May 10, literally the same day it filed its workforce reduction notice to the US Securities and Exchange Commission. This deal, which adds 56 ADESA US sites into Carvana’s portfolio, was in the works for some while.
Garcia stated that Carvana continues its growth and delivers exceptional experiences to increasing numbers of customers, despite the recent industry slowdown. We intend to use the ADESA US alliance to improve the experience of ADESA US customers as well as to concentrate on significant and sustained efficiencies and unit economic improvements to allow Carvana to accelerate into profitable growth when the industry inevitably recovers.
Carvana’s SEC filing states that the “opportunity” for the 2,500 employees who lost their jobs will allow them to receive four weeks of salary plus an additional week for each year they spent at the company. Carvana’s executive staff will also be eligible for extended health coverage. To help pay the severance package Carvana’s executives will forgo their salaries for the remainder of 2022.