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Used Cars Become an Expensive Problem for Online Dealers Like Carvana

The very business model that was a winner during the pandemic is now scaring investors.

Carvana Sees Triple-Digit Growth Blitz Through Used Car Concerns
Photographer: Laura Buckman/Bloomberg

Ernie Garcia III wants to do for used cars what Jeff Bezos did for books, but disrupting the sale of 5,000-pound SUVs is proving far more challenging than peddling paperbacks. Carvana Co., the internet-based used-car dealer Garcia founded in 2012, has become a poster child for pandemic high-flyers whose stocks have plunged back to earth. Over the past nine months, Carvana has seen 92% of its market value vanish, taking with it the majority of a fortune amassed by Garcia and his father, a major shareholder. Now the company is pivoting from its growth-at-all-costs strategy toward a more cost-focused approach to restore investor confidence and regain its operational footing.

“Markets are reacting right now in a way that seems to be very fearful about the future,” says Garcia, who’s chief executive officer. “That’s the message we are reading and hearing loud and clear.”