Carvana to cut 1,500 jobs as online auto dealer’s troubles mount • Hacker News Board

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#71

Post by shaburn » Fri, Nov 18, 2022, 9:26 PM UTC

parkingrift wrote: post #29

twblalock wrote: post #18

Earlier quoted context omitted.

If that was the case, why isn't the same thing happening to Carmax and Vroom and the other Carvana-style used-car dealers? Used car prices are falling and I assume it would hurt all of them, but it seems to be hurting Carvana more than the others.

Pardon my ignorance, but why would used car prices necessarily impact a used car dealer? Surely these dealers have to pay more to buy these cars and so their margins should be unchanged? Or is the issue that they are buying used cars and prices are falling so fast that their margins are shrinking?

Supposedly Carvana went crazy and overbid everyone for cars sight unseen online. This massive inventory is now depreciating at full percentage points on a weekly basis with volume way down.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#72

Post by femto113 » Fri, Nov 18, 2022, 9:27 PM UTC

1123581321 wrote: post #24

wcunning wrote: post #3

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities and no ability to refinance in a rising interest rate market. The real question for normal people is if Carvana sells off a huge chunk of its inventory at fire-sale prices, does that accelerate the crash in used car prices? Is March of 2023 the right time to pick up that fun…

There isn’t going to be a fire sale. Their margins per car are positive and have only contracted about 20%. The margin isn’t enough to sustain their business, but the cars are priced in line with the market. Worst case, they would restructure in chapter 11 and continue to operate retail as normal.

The value of their inventory is plummeting and those margins will continue to contract for however long it takes the last couple of bubble years to work their way through the system. Maybe the brand would survive a bankruptcy, but the equity definitely won't, and the bondholders are going to take a serious haircut too.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#73

Post by woeirua » Fri, Nov 18, 2022, 9:27 PM UTC

nlvbkdfsaldsa2 wrote: post #66

woeirua wrote: post #59

All of the iBuyer like companies are going bankrupt. Turns out there just no way to cut costs enough to make a profit in these low margin, capital and asset intensive industries. The idea that Carvana, OpenDoor, Redfin, Zillow, etc. were ever going to achieve something like a monopoly over their respective industry was laughable at best. Doomed from the moment they opened the doors.

Carmax is very successful, not sure what they have to do with these tech companies

Whoops, didn't know that they were that profitable. My bad.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#74

Post by shaburn » Fri, Nov 18, 2022, 9:28 PM UTC

wilsonnb3 wrote: post #41

gbronner wrote: post #30

The concept is great. But the volatility in the used car market has been historically unprecedented, and there's no easy way for them to hedge this. As an FYI, I sold a car this spring for 8% over what I paid for it 6 years prior, i.e. it was worth about 85% of orig price adjusted for inflation. Today, edmunds appraises it for 45% of orig price adjusted for inflation. That is an insane move on a durable asset.

The concept is great but I never really saw the point of Carvana when CarMax already exists. Unless your plan is just to leverage easy capital to push CarMax and traditional dealers out of the business like Uber and taxis.

Carmax is an Amazing operator. Shift has now cut test drives at home.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#75

Post by gopher_space » Fri, Nov 18, 2022, 9:44 PM UTC

femto113 wrote: post #72

1123581321 wrote: post #24

Earlier quoted context omitted.

There isn’t going to be a fire sale. Their margins per car are positive and have only contracted about 20%. The margin isn’t enough to sustain their business, but the cars are priced in line with the market. Worst case, they would restructure in chapter 11 and continue to operate retail as normal.

The value of their inventory is plummeting and those margins will continue to contract for however long it takes the last couple of bubble years to work their way through the system. Maybe the brand would survive a bankruptcy, but the equity definitely won't, and the bondholders are going to take a serious haircut too.

Pandemic quality builds of large, expensive internal combustion vehicles at a time of soaring gas prices, limited parts, and rising labor costs.

Parting them out might make sense.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#76

Post by indymike » Fri, Nov 18, 2022, 9:59 PM UTC

1123581321 wrote: post #64

indymike wrote: post #38

Earlier quoted context omitted.

> There isn’t going to be a fire sale. That depends on the interest to carry a car in inventory. Contracting margins plus increasing "floorplan" (what dealers call the line of credit they use to buy inventory) rates can be devastating.

If they can’t carry their inventory, they’ll go to another retailer through wholesale auction or direct buy, and show up for sale elsewhere at market prices. Carvana even owns an auto auction chain, which they bought to secure access to inventory but now might use to preferentially liquidate.

If Carvana isn't moving cars fast enough and is trying to liquidate inventory, just who is going to buy them?

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#77

Post by gbronner » Fri, Nov 18, 2022, 10:15 PM UTC

orangepurple wrote: post #20

syspec wrote: post #17

Earlier quoted context omitted.

Meh, looks like a bunch of regulatory capture by existing auto-dealerships.

Failure to transfer title would make me extremely mad as a customer

I had the same issue with Beepi. Had a friend who worked there -- I got the sense that complying with a bunch of interstate car sales was rather tricky and they often had issues getting through the state DMVs.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#78

Post by dylan604 » Fri, Nov 18, 2022, 10:27 PM UTC

wcunning wrote: post #3

This is less of a tech layoff story and more of an overlevered business with crashing asset values against very difficult short term liabilities and no ability to refinance in a rising interest rate market. The real question for normal people is if Carvana sells off a huge chunk of its inventory at fire-sale prices, does that accelerate the crash in used car prices? Is March of 2023 the right time to pick up that fun…

>Is March of 2023 the right time to pick up

I hope so. I've been without a car since just before lockdown in 2020, and it has been long enough (by some time now). It's just an insane time to buy a car, so the time without continues to extend. I might be able to survive another 6 months ;)

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#79

Post by dylan604 » Fri, Nov 18, 2022, 10:34 PM UTC

dwater wrote: post #23

twblalock wrote: post #18

Earlier quoted context omitted.

If that was the case, why isn't the same thing happening to Carmax and Vroom and the other Carvana-style used-car dealers? Used car prices are falling and I assume it would hurt all of them, but it seems to be hurting Carvana more than the others.

I don't haven't been following CarMax, but CarLotz was another new entrant to the field that went public via an SPAC IPO in 2020 at a value of $1.9B that now has a market cap of around $24M. They are also trying to merge with Shift, which is in a similar state.

Noticing a trend in these "disruptors" in that they can't survive. I'm really not sure how CarMax and these other vendors are even being considered in the same category.

Re: Carvana to cut 1,500 jobs as online auto dealer’s troubles mount

#80

Post by nradov » Fri, Nov 18, 2022, 10:38 PM UTC

gopher_space wrote: post #75

femto113 wrote: post #72

Earlier quoted context omitted.

The value of their inventory is plummeting and those margins will continue to contract for however long it takes the last couple of bubble years to work their way through the system. Maybe the brand would survive a bankruptcy, but the equity definitely won't, and the bondholders are going to take a serious haircut too.

Pandemic quality builds of large, expensive internal combustion vehicles at a time of soaring gas prices, limited parts, and rising labor costs. Parting them out might make sense.

Is that a joke? Parting out cars is very labor intensive and only makes economic sense in limited circumstances. Outside the HN bubble, most US consumers still want internal combustion vehicles regardless of gas prices.