Ok, 4th up on "10k in 10 tweets" is Carvana.
[THREAD]
[THREAD]
1/ Carvana is an e-commerce marketplace for buying and selling cars.
The biggest competitors are CarMax (which is a great company) and Vroom (which recently IPO'd).
The biggest competitors are CarMax (which is a great company) and Vroom (which recently IPO'd).
2/ The used car market is huge and extremely fragmented.
- There are 40 million used car transactions every year.
- The top 100 retailers, combined, own less than 9% of the market.
- There are 40 million used car transactions every year.
- The top 100 retailers, combined, own less than 9% of the market.
3/ Carvana has a few advantages over traditional dealerships.
For example, instead of spending $22 million on a dealership, they can plow that into logistics hubs where inventory is reconditioned and picked up.
For example, instead of spending $22 million on a dealership, they can plow that into logistics hubs where inventory is reconditioned and picked up.
4/ Carvana's network effect is expanding inventory selection, which increases demand, which enables them to add more markets, which lowers delivery times, which leads to more demand and more inventory.
5/ The value prop is also much better compared to a traditional dealer. No haggling over the price, no need to leave your house, more selection, sometimes even lower prices.
6/ The company has 3 revenue segments:
1. Used vehicles (makes up 87% of sales)
2. Wholesale
3. Other (service contracts, GAP waivers, loans)
"Other" makes up 50% of gross profit though it is only 6% of sales. This is ordinary in the realm of used-car dealers.
1. Used vehicles (makes up 87% of sales)
2. Wholesale
3. Other (service contracts, GAP waivers, loans)
"Other" makes up 50% of gross profit though it is only 6% of sales. This is ordinary in the realm of used-car dealers.
7/ A bigger portion of sourced vehicles are coming from trade-ins too. If these cars aren't up to Carvana's standards, they will sell them through auctions, labeled as "wholesale" revenue.
8/ Sales growth has been pretty crazy over the past 4 years.
134% annualized.
Gross margins have also increased to 13%.
134% annualized.
Gross margins have also increased to 13%.
9/ The CEO, Ernie Garcia III, is the son of the founder of DriveTime, the 4th-biggest independent dealership.
DriveTime incubated Carvana and has helped out a lot over time. The Garcia's hold 93% of the voting power.
Garcia II was convicted for straw borrowing in 1990.
DriveTime incubated Carvana and has helped out a lot over time. The Garcia's hold 93% of the voting power.
Garcia II was convicted for straw borrowing in 1990.
10/ Carvana's oldest market, Atlanta, is at 2% penetration after 7 years. That is roughly CarMax's market share in the US.
This business is very capital intensive. Carvana's unit economics aren't pretty but they are improving while taking market share.
This business is very capital intensive. Carvana's unit economics aren't pretty but they are improving while taking market share.
Other notes:
- You can see the gross profit per unit is increasing from right to left
- The company has about $1.5 billion in net debt but they have been able to sell stock in the past
- The company is now in over 150 markets
- You can see the gross profit per unit is increasing from right to left
- The company has about $1.5 billion in net debt but they have been able to sell stock in the past
- The company is now in over 150 markets
