Carvana Expects New Car Production to Boost Used Car Sales – PYMNTS.com

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Carvana reportedly expects that as more new vehicles are built, the company’s used car business will benefit.

“There will likely be much more car production, and that will probably bode well,” Carvana CEO Ernest Garcia III told reporters Tuesday (May 14) at an Automotive Press Association event near Detroit, Bloomberg reported Tuesday.

Online car shopping guide Edmunds said in April that new vehicle inventory was “rebounding.”

“Compelling new product launches combined with the reintroduction of incentives and rebounding inventory in the new vehicle market are all positive signs for shoppers, but elevated interest rates have dampened any positive market momentum,” Jessica Caldwell, head of insights at Edmunds, said in an April 2 press release.

Garcia said May 1 during Carvana’s quarterly earnings call that the used car retailer’s inventory had been “constrained.”

“Our inventory is currently smaller than we would like, resulting in less selection available to our customers,” Garcia said during the call. “All else constant, we believe this is negatively impacting our sales volumes today.”

To address this challenge, Carvana has been ramping up production nationwide to expand selection levels for customers in the near term, enhancing its reconditioning capabilities that are crucial for scaling but require substantial physical infrastructure and regulatory approvals, and leveraging its existing infrastructure and developing a playbook to optimize reconditioning operations, Garcia said.

Carvana has also been sourcing cars for resale by enabling potential sellers to offer their cars and complete the deal from their desktop or mobile device. The company also uses sophisticated bidding algorithms to optimize its gross profit per unit (GPU).

For inspecting and reconditioning used vehicles to prepare them for resale, Carvana’s proprietary CARLI technology streamlines inspection processes, systemizes parts ordering and tracking, and uses machine learning (ML) to identify and manage costs.

“We have seen a more than $900 step-down in non-vehicle retail cost of sales since our peak over a year ago, and I think that’s been driven by many sources: getting better at managing the process of reconditioning, getting better at parts procurement and efficiency, and a number of things,” Carvana Chief Financial Officer Mark Jenkins said in February.

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