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The used-vehicle market soared during the pandemic but is now facing strong economic headwinds.
Used-car retailer Carvana is laying off about 1,500 people, or 8% of its workforce, CEO Ernie Garcia said in a Friday email to staff obtained by CNBC and The Wall Street Journal.
Garcia cited strong economic headwinds as customers delay large purchases, like cars, amid higher financing costs: “We failed to accurately predict how this would all play out and the impact it would have on our business,” he wrote.
This is Carvana’s second round of job cuts this year; 2,500 employees were laid off in May.
The Arizona-based company, which offers online buying and selling, grew quickly in the pandemic as used-car prices soared. Recent high prices and rising interest rates hit the used-vehicle market hard.
“The slowing of the market is kind of the core issue,” Jessica Caldwell, executive director of insights for Edmunds.com, told the Associated Press after shares tumbled this month. Some used-car dealers paid top dollar for late-model used vehicles, only to find that prices fell during the past few months, she said.
Plus, new-vehicle supplies, long crimped by a shortage of computer chips that cut production, are improving, drawing buyers away from higher-end used vehicles, she said. Sales of new vehicles also benefit from automakers subsidizing lower-interest loans.
The layoffs mainly impact Carvana’s corporate and tech teams as well as some operational positions, Garcia wrote. Affected employees were promised severance pay, three months of health-care coverage and other benefits.
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Carvana’s shares fell 3% Friday to $8.06. The company’s stock has fallen about 97% for the year.
“Today is a difficult day,” Garcia wrote. “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.”
Some of the world’s biggest tech companies have trimmed their workforces in recent weeks. Amazon announced mass layoffs extending into next year, Facebook owner Meta is laying off 11,000, and new Twitter CEO Elon Musk slashed the company’s workforce in half this month.
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