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  • Writer's pictureAmi Kassar

AmiSight 5/25: COVID Hangover - Do You Have One?

Some Business Models that Thrived During the Pandemic are Starting to Wane, Creating a COVID Hangover.

The online used car market was very successful during the pandemic thanks to short supply, high prices, and lack of in-person sales. However, online dealers like Carvana are now facing challenges. Their stocks are falling, at least 92% of their market value has disappeared, and the Carvana CEO Ernie Garcia III thinks this is because consumers are fearing the future. Carvana and other similar companies have started to scale back on their growth initiatives by cutting advertising, marketing and capital expenses. Carvana also plans to lay off 12% of their employees and freeze executive salaries until next year.

It looks like consumers have decided to stop over paying for used cars. As demand started to drop, Carvana had to contend with high inventory, weather, and workers calling off sick. They quickly started losing money on each car sold. Now, they are looking to offer more affordable cars on their website and accept riskier buyers. While they are no longer prioritizing growth, they did recently make an acquisition to have more warehouses and lots- reducing transportation costs. While that sounds all well and good, many are questioning if it was worth the price.

This is just one example of companies that were successful during the pandemic having to re-pivot as we make our way out. Take the time today to think about if you’re one of those companies.

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