Carvana is laying off 1,500 workers, which make up about eight percent of its current workforce due to lower demand for used cars, according to Reuters. These latest job cuts come after a crushing “workforce reduction” of 2,500 workers dating back to May of this year.
In total, the online used-car retailer has now lost at least 4,000 workers in less than a year, proving that boom and bust cycles in the used car market in the U.S. move at a breathless pace. Despite the difficulty that many buyers are still facing to find used cars — or maybe because of it — the used car market is losing steam, and major used auto retailers seem to have overestimated the lasting power of recent surges in used car demand. Or at the very least, they seemed to have overestimated the willingness of buyers to shoulder higher financing costs.
The average APR for car loans across the industry has been clawing its way up, and Reuters suggests that hybrid-working models (in which workers can choose to commute to work less often, and presumably are therefore less reliant on private transportation) have affected the used car market negatively, especially as people rethink their budgets to save money wherever possible.
An announcement from CNBC confirms that Carvana executives were not expecting the steady decrease in used-car demand to affect the company:
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Why that would be the case is anybody’s guess. If Carvana had recently been affected by the used car-buying slowdown to a point of laying off 2,500 workers — who, at the time, made up 12 percent of the retailer’s workforce — it stands to reason that an ongoing downward trend would likely affect the company in the near future. And that trend would’ve not been hard to miss altogether: as CNBC notes, Carvana shares are currently worth 90 percent less compared to last year.
Carvana has been bleeding profits and workers for months now, and from the looks of it, that’s not going to stop in the near future. These layoffs are part of Carvana’s latest effort to cut costs, but unless people start buying used cars in droves again, it looks like the used-car retailer and its workers could face tough times ahead.