The company's freefall continues and investors reacted immediately.
Arizona-based Carvana is in a situation few thought possible only a year ago. The national used car dealership chain with the vending machine-style towers announced it is laying off 1,500 workers this past Friday. That's 8% of its workforce. Carvana CEO Ernie Garcia, in a company email titled "Today is a hard day," detailed the difficult economy leading to higher financing costs and customers delaying car purchases as the main reasons for the company's unfortunate actions.
Carvana, according to Garcia, "failed to accurately predict how this would all play out and the impact it would have on our business… the world around us has continued to get tougher and to do what is best for the business, we have to make some painful choices to adapt."
Carvana stock closed the end of the day Friday at $8.06 a share, a 3.1% drop following Garcia's announcement. This year alone the company's stock has dropped by a whopping 97%. It reached an all-time high of $376.83 per share in mid-August 2021. These layoffs, like those at Meta and Twitter, affected Carvana's tech employees as well as some in the corporate department.
The CEO confirmed those let go will receive financial compensation and three months of healthcare. "To those impacted, I am sorry," Garcia said. "As you all know, we made a similar decision to this one in May. It is fair to ask why this is happening again, and yet I am not sure I can answer it as clearly as you deserve."
Carvana grew at a rapid pace during the pandemic with hiring happening at a fast pace. It turns out Carvana grew too fast for its own good and now 1,500 people are paying the price. Aside from the layoffs, several Carvana locations have encountered state-level problems.
Last September, for example, a Maine resident was offered only $300 in compensation and an impersonal apology following their purchase of a defective 2015 Volkswagen Tiguan. In October, a Carvana location in Detroit had its license suspended after employees allegedly destroyed documents and neglected to update odometer readings. Only last week were two Pennsylvania locations suspended by state regulators from registration actions and motor vehicle titling due to suspected business misconduct. Both, however, can still sell vehicles for now.
What will be Carvana's next move is anyone's guess but things are going to have to change quickly if the company wants to stay in business.