The Rise And Fall Of Carvana, The Amazon Of Used Cars

Had Carvana played the cards right, it could have been a market monster to rival Amazon in the US and Alibaba in China. The problem is that it didn't. All in favor of his Carvana, which only underscores how awful the results are. During the pandemic, even consumer segments previously uninterested in online retail have discovered digital technology. Used car dealers had to close their physical stores.And the buyer received a stimulus check that can be used as a down payment Secondhand carBasically, the entire universe conspired in favor of Carvana, and for a while it worked. Online used car dealers have transformed the buying process and seemed to dominate the market for a short time. Everywhere I looked I saw references to Carvana in TV and radio ads. The retailer spent a lot of money on marketing to attract buyers. But then the news of endless legal troubles broke. For example, in Florida, an online used car retailer consistently violated state law by failing to transfer ownership to a buyer within his allotted 30 days. The allegations include multiple instances in which Carvana made customers wait over 100 days, and in one instance he waited 253 days to obtain the title. Attorneys filed two separate class actions against Carvana for failing to provide permanent registration to consumers who purchased cars. According to the lawsuit, Carvana failed to "timely register" the vehicle, and more shockingly, this could be for a period of "more than two years." Residents of Pennsylvania and Maryland who had negative experiences with Carvana said they could not legally drive. This was because the temporary tags issued by Carvana expired frequently, violating the law. But these weren't the only issues Carvana had to deal with. RELATED: Here's Why Car Dealers Could Face a Disappointing Future

Carvana has more problems ahead

Carvana has successfully outraged and denounced shareholders, customers, governments and investors. However, this is not surprising given the endless legal disputes, scandals and controversies that continue to erupt. Everything that could have happened has already happened. According to a report from Schubert Jonckheer & Kolbe LLP Since October, the company has been investigating potential derivative claims filed by Carvana Co. stockholders for alleged misconduct by certain members of Carvana's officers and directors. And in 2020, forbes reported that the power duo behind the online used-car retailer, Ernie Garcia II and his son, Ernie Garcia III, have also been accused of insider trading in a lawsuit filed by a shareholder in Delaware. . Given the long string of controversies, it's understandable that various states have suspended his Carvana's license for multiple violations. Meanwhile, investors and shareholders are outraged that the stock is plunging after hitting an intraday high of $376.83 per share on Aug. 10, 2021, before plummeting 97% in 2022. increase. Carvana executives employ 1,500 employees or, depending on the company's current situation, the company's workforce. Also, in an internal message headlined "Today is a Tough Day," his CEO at Carvana, Ernie Garcia, blamed the economy as a major cause of the company's problems.according to CNBC, The email describes a number of economic challenges, including rising financing costs and delays in buying a car. Garcia said Carvana "couldn't have predicted exactly how this would play out and what impact it would have on our business." Related: 10 things to know before buying a car online

Carvana bankruptcy risk rises

Carvana's management may believe that cost-cutting measures will keep the company from bankruptcy, but in reality, economic headwinds can prove fatal to the company. Additionally, the online used car retailer has done little to restore consumer confidence, resulting in massive reputational damage in endless scandals. Investors, meanwhile, are not confident the company can turn things around and reach its financial targets. Therefore, all stakeholders remain dissatisfied. Moreover, the demand for used cars is declining due to fears of a recession. Some studies show that consumers are spending less on big ticket items due to rising inflation and interest rates. According to some data, used car sales in November fell 10% year-on-year, and 1% from October. cox auto analysis. Unsurprisingly, if the Fed continues to raise rates, borrowing will become even higher, discouraging consumers from buying cars. In a nutshell, Carvana may prevent a complete collapse in 2023, but it will need to take far more drastic measures than simple cost-cutting measures to do so. Sources: WFLA, 6abc, WAFB9, Wall Street Journal, PR Newswire, Forbes, CNBC, Cox Automotive