Carvana is a disruptive online used-car seller that was founded in 2012 and went public in 2017. It experienced rapid growth during the pandemic, when a shortage of new cars and supply chain restrictions accelerated the second-hand car market. Carvana reached a market capitalization of $50 billion in 2021, selling 425,000 cars in that year alone.1
“In our first eight years, we were one of the fastest growing technology companies of all time.” - Mark Jenkins, Chief Financial Officer, Carvana
Although demand has reduced since this time, Carvana has remained profitable and is proactively navigating the changing landscape of its industry. “In our first eight years, we were one of the fastest growing technology companies of all time,” says Mark Jenkins, Chief Financial Officer, Carvana.
“We were one of the four fastest companies to join the Fortune 500 alongside Facebook [now Meta], Google, and Amazon. Our product has been really appealing to consumers and the auto industry. We've seen a tremendous amount of growth,” he explains.
Accelerating change within the auto industry
One of the keys to Carvana’s growth has been its ability to adapt to opportunities in the fast-moving automotive industry. “When interest rates started to rise, used vehicle prices rose,” says Jenkins. “We really shifted our company's focus toward efficiency and profitability, and that's where we're still focused today,” he explains.
“We've meaningfully improved the profitability of the business over the last two quarters and are positioning the business for a very successful return to growth when it's time to do so,” he adds.
As well as ensuring it remains profitable, Carvana also aims to address the issue of affordability for its customer base, especially after the pandemic pushed up unit prices and interest rates rose to new highs.
“These factors have combined to raise monthly payments for auto purchasers,” says Jenkins. “We try to address that in part with technology and by guiding customers toward cars that are more affordable for them; as well as by lowering our cost structure, which allows us to provide better value to customers,” he adds.
“We are seeing many customers buying cars on their phone; from searching to digitally signing contracts to completing an entire vehicle purchase transaction.”
Mark Jenkins, Chief Financial Officer, Carvana
Jenkins points to another promising development in Carvana’s industry: the rise of mobile ecommerce. “Over time we’ve seen an increasing fraction of our digital sales happening on phones versus on a desktop,” he says. “We are seeing many customers buying cars on their phone; from searching to digitally signing contracts to completing an entire vehicle purchase transaction,” he reveals.
Another developing trend has been the emergence of AI, which Jenkins sees as a potential tailwind for those who seize the opportunity within the industry. “We absolutely think AI is a relevant trend for us, whether it's automating customer communication or content creation, helping you train people faster, or expediting software development,” he notes.
In the fast lane to growth
Carvana is a company that is constantly on the move. It acquired wholesale vehicle auction platform Adesa in early 2022 and sees opportunities for significant growth in the coming years. “Adesa is a unique automotive asset with enormous amounts of potential vehicle inspection and reconditioning capabilities, and large amounts of storage capacity,” Jenkins explains.
“We think that those assets are really unique and valuable when looking at our opportunities for future growth. We’re around 1% of the U.S. used vehicle market and we think there's an opportunity to increase that very, very significantly,” he adds.
In order to realize this opportunity, Carvana will remain focused on effectively communicating its commercial story to investors. “Perhaps the number one difference between operating as public company relative to a private one has been the amount of time that is necessary to devote to communication,” Jenkins explains.
Moving past the pandemic
To deliver its vision for expansion, Carvana is committed to tackling the challenges faced by the automotive tech software space over the next 5-10 years. Part of that process is grappling with the ongoing after-effects of COVID.
“Being flexible and thoughtful and making sure you’re positioned to manage uncertainty is very, very important in the aftermath of COVID.”
Mark Jenkins, Chief Financial Officer, Carvana
“Managing the continued ripple effects of COVID will be a key challenge,” says Jenkins. “I was such a large shock to economies and industries and coming out of it we saw so many things that we hadn’t seen before. This was the first time we saw a 40%-50% increase in vehicle prices in a short period of time. 2022 also saw one of the fastest increases in short-term interest rates in many decades.
“I think that being flexible and thoughtful and making sure you’re positioned to manage uncertainty is very, very important in the aftermath of COVID,” he concludes.
1 https://www.ft.com/content/3cccf29b-3c4b-4feb-8a28-edb88e1bd7b2
Featured Guest:
Mark Jenkins
Chief Financial Officer, Carvana