Carvana makes reconditioning gains

Carvana is now scaling its production capacity to meet the booming demand. It opened its 12th inspection and reconditioning center, near Birmingham, Ala., during the first quarter of 2021, giving the retailer annual production capacity of more than 680,000 vehicles. It plans to open one more such facility this year, and eight more in 2022. That would bring its capacity to 1.25 million vehicles annually by the end of next year.

While the used-vehicle market has seen “some impacts” from the microchip shortage that is constraining new-vehicle production, Garcia said, he does not see it as a primary driver of how business in the used market will play out during the next six to 12 months.

With its production capacity plans, Carvana remains focused on the long term and its goal of ultimately selling 2 million cars or more a year. Carvana retailed 92,457 vehicles in the first quarter, a 76 percent gain from a year earlier.

“Those are big investments in our future that are kind of being made with a much longer lens than the current chip shortages that we’re seeing today,” Garcia said.

Ultimately, Garcia is aiming for Carvana to become the industry’s “largest, most-profitable automotive retailer.”

It still has a long way to go.

The online seller has yet to turn a profit though its losses are shrinking. It reported a net loss of $82 million in the first quarter, better than its loss of $184 million in the first quarter of 2020.

But the company is growing fast and expanding per-vehicle profitability. In the first quarter, revenue doubled to $2.25 billion, and gross profit per vehicle rose 38 percent to $3,656.

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