Carvana cuts 8% of workforce due to slowing demand for used cars By Reuters

© Reuters. FILE PHOTO: The Carvana logo is seen in this illustration taken on June 27, 2022. REUTERS/Dado Rovic/Illustration/File Photo

By Nathan Gomez

(Reuters) – Carvana on Friday announced another round of job cuts that will affect about 1,500 employees or 8% of its workforce, as it tries to cut costs amid slumping demand for used cars on the back of rising interest rates.

The company’s CEO, Ernie Garcia, said in an internal memo obtained by CNBC that the company has faced economic headwinds due to rising financing costs.

CNBC, which first reported the job cuts, added, citing the memo, that Carvana “also failed to accurately predict how all of this would happen and impact our business.”

Carvana said in a regulatory report that the workforce reduction has begun to match the company’s size with the current environment and achieve financial targets.

The company added that the job cuts primarily affect employees in the company’s technology and operating divisions.

Demand for used cars has been hit by hybrid business models and rising costs from rising interest rates, as consumers rethink personal mobility options to try and cut back on their day-to-day expenses.

Weak demand has forced Carvana to sell many used cars at lower prices after purchasing them at a higher cost due to strong demand for personal transportation.

It now faces soaring expenses that have produced poor results in the past five quarters, spooking investors and sending its shares lower this year.

“Carvana’s restructuring is a work in progress for several quarters,” Bird analyst Colin Sebastian commented earlier this month after the company reported a larger-than-expected loss.

Tempe, Arizona, known for its automated vending machines, earlier this year laid off about 2,500 employees, or 12% of its workforce.

Shares of Carvana were nearly flat in overnight trade, after closing down 3% on Friday. They’re down about 97% for the year.

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