Carvana Co on Friday announced another round of job cuts that will impact about 1,500 employees, or 8% of its workforce, as it attempts to cut costs amid waning demand for used cars on the back of rising interest rates.
The company’s chief executive officer, Ernie Garcia, said in an internal memo obtained by CNBC that the company faced economic headwinds from higher financing costs. Carvana also “failed to accurately predict how this would all play out and the impact it would have on our business,” added CNBC, which first reported the job cuts, citing the memo, reports Reuters.
The workforce reduction was initiated to match the company’s size with the current environment and achieve financial goals, Carvana said in a regulatory filing.
The job cuts mainly impact employees in the corporate, technology and operation departments, the company added.
Demand for used cars has been hurt by hybrid-working models and higher costs caused by rising interest rates, as consumers rethink personal mobility options to try and trim their daily expenses. The weak demand has forced Carvana to sell many used cars at lower prices after having acquired them at a higher cost due to strong demand for personal transportation.
It is now faced with soaring expenses that have led to dour results in the last five quarters, raising investor concerns and sending its shares tumbling this year.
“Carvana’s restructuring is a multi-quarter work-in-progress,” Baird analyst Colin Sebastian had commented earlier this month after the company reported a bigger-than-expected loss.
The Tempe Arizona-based company, best known for its automated car vending machines, earlier this year laid off around 2,500 employees, or 12% of its workforce.
Shares of Carvana were nearly flat in evening trade, after closing down 3% on Friday. They are down about 97% for the year.
