BREAKING news! Carvana & Vroom is bleeding cash. Is Ecommerce in auto DOA?

[joe.pistell]

Very impressive considering tech (& all stocks) are getting crushed today.




$CVNA shorts getting roasted.

 

[Cullen C]

Grabbed this from a LinkedIn post of a pretty progressive, successful dealer...



To me, this accentuates just how Carvana continues to differentiate itself from even the best dealership alternatives. Relying on numerous third party providers is absolutely necessary and is also more likely lead to a less seamless experience.

 

[craigh]

Grabbed this from a LinkedIn post of a pretty progressive, successful dealer...

View attachment 4142

To me, this accentuates just how Carvana continues to differentiate itself from even the best dealership alternatives. Relying on numerous third party providers is absolutely necessary and is also more likely lead to a less seamless experience.

"We will be able to sell a car" is something I am still waiting to see from Roadster, MotoCommerce, etc.
Every demo I have seen is just a highly qualified lead.

 

[JamieS]

More power to them. I love everything about the brand and the product. I just can't wrap my monkey brain around a net loss of $82m and an ad cost per sale of $1,074. But hey, they're making progress. Last year Q1 ad cost per sale was $1,354. Also, they're stating 3.9m site unique visitors per month. That would be a visit to sale rate of about .3% (side note they mention in the report they purchased Google 360! I think that's the first I've ever heard of). I wonder how many of those visitors are actual shoppers and not dealers/vendors/press/etc.?

 

[DrewAment]

Carvana: The Cash Incinerator

https://seekingalpha.com/article/4262144-carvana-cash-incinerator

Probably the best breakdown I have seen.

 

[hondadealer]

Sorry, but I just don't see a path to profitability for Carvana. They are growing like crazy but to what end as there loss per car/sold is growing, not declining. There is nothing proprietary about what they are doing and no reason for a consumer to be loyal to the brand once they have transacted. Even assuming that the customer had a great experience, their propensity to stay loyal on their next transaction will still be based partially on price and inventory availability.

What's more, they have zero competitive advantage over even a single point dealer in acquiring inventory. Beyond trade-ins, (which are typically older and of less desirability versus new car trades), their lack of brick and mortar works at a disadvantage to them. They have to acquire every used car one by one, just like I do. They don't produce their own product and can't leverage their size to gain a competitive advantage in acquiring inventory. This is Amazon's golden bullet and it doesn't exist for Carvana.

The real money maker in Used Cars relates to F&I and creating a customer for future service visits. Their online model makes F&I more difficult to maximize and doesn't incorporate fixed operations.

People who are investing in this stock see an innovative business model disrupting an old industry. What they fail to see is how that industry has changed, how competitive that market is (especially in Used Cars), and how difficult it is and will always be to gain a competitive advantage when acquiring used vehicles.

 

[Cullen C]

Sorry, but I just don't see a path to profitability for Carvana. They are growing like crazy but to what end as there loss per car/sold is growing, not declining. There is nothing proprietary about what they are doing and no reason for a consumer to be loyal to the brand once they have transacted. Even assuming that the customer had a great experience, their propensity to stay loyal on their next transaction will still be based partially on price and inventory availability.

What's more, they have zero competitive advantage over even a single point dealer in acquiring inventory. Beyond trade-ins, (which are typically older and of less desirability versus new car trades), their lack of brick and mortar works at a disadvantage to them. They have to acquire every used car one by one, just like I do. They don't produce their own product and can't leverage their size to gain a competitive advantage in acquiring inventory. This is Amazon's golden bullet and it doesn't exist for Carvana.

The real money maker in Used Cars relates to F&I and creating a customer for future service visits. Their online model makes F&I more difficult to maximize and doesn't incorporate fixed operations.

People who are investing in this stock see an innovative business model disrupting an old industry. What they fail to see is how that industry has changed, how competitive that market is (especially in Used Cars), and how difficult it is and will always be to gain a competitive advantage when acquiring used vehicles.

A couple quick points from the earnings transcript a few of days ago to consider:

“We also had a phenomenal quarter in GPU posting over $2,400.” - So while I agree the ad spend is enormous when you focus on the fundamental unit economics they are making incremental gains each qtr

“Our EBITDA margin was another high point for the quarter. In 2016 heading into our IPO, we had and EBITDA margin loss of about 23%. Since then, we have methodically march that number down to about 17% in 2017 about 10% in 2018 and 7.4% in the first quarter of 2019.” - While they are burning a ton of cash as they grow at a ridiculous pace(adding density to existing markets) they have also acquired 3 companies over this time period while reducing EBITDA, again fundamentally encouraging.

 

[SoCalMark]

Carvana is just going through growing pains -- They will make it and the reason why is that it is what anyone 35 and under wants from a car buying experience. No one want's to sit in a dealership like mom and dad did for five hours just to purchase a car. It's the number one gripe and joke of conventional car dealerships. Salespeople will be swept away by technology and those who refuse to believe it will fall to the empty lots.

Our world now lives and breathes with online reviews and that's pretty much all that matters with the internet generation. Carvana is the new Amazon of car buying and dealers better pay attention. People are taking notice and they are even making YouTube reviews of their service -- I can't say I have ever seen this done for a conventional dealership.

 

[Cullen C]

I typically(possibly up to this point exclusively) post positive updates about what is going on with Carvana. I have to say this is makes me cringe a bit, particularly after issuing more shares at $65.

 

[basemmr]

The concept of SELLING a car online is going to require a bit of "bending over backwards" to the nth degree; More specifically two parts to the formula: 1)Impeccable inventory i.e. practically new or very low mileage units which ultimately means Carvana is paying up for ALL their cars at the auction which then results in a very high C2M (slim margins). 2) In order to counteract those slim margins, Carvana is going to need an unbelievable amount of inventory....like new car store status except with all used (and depreciated) inventory. Having a ton of quality inventory also helps offer reassurance to the consumer as well obviously. Gotta remember there's no salesman for the customer to go to, credibility needs to be offered through a guarantee (7 day return policy) and integrity (quality semi-FLR units).

Point is all of that takes boatloads of cash, Carvana is paving the way for the rest of us here..