Carvana’s Resilience in Uncertain Market Conditions

Carvana, the online used car retailer, has demonstrated remarkable growth despite economic uncertainties, with CEO Ernie Garcia attributing the company’s success to its innovative business model rather than short-term market conditions.

In a recent interview with CNBC’s “Squawk Box,” Garcia revealed that Carvana reported a 46% increase in sales compared to the previous year, significantly outpacing competitors in the automotive retail space.

“We had an incredible quarter this last quarter. We were about twice as profitable as the average U.S. automotive retailer,” Garcia stated. “We grew at 46%. The second fastest automotive retailer growth was 6%.”

When questioned about the drivers behind this substantial growth, Garcia pointed to the company’s long-term strategy rather than immediate market conditions. “This may be a bit of a boring answer, but I think the move in the business is about 12 years of building something that’s better for customers,” he explained.

The Carvana business model represents a significant departure from traditional automotive retail, featuring a completely reimagined supply chain and customer experience. “We’ve got a totally different supply chain. We’ve got a totally different customer experience. We’ve got a different way that we acquire cars and deliver cars,” Garcia noted.

Regarding potential impacts from proposed tariffs under the incoming Trump administration, Garcia expressed measured confidence that Carvana would not face significant direct effects. “I don’t think that we’re a business that’s likely to be super directly impacted,” he said, explaining that used cars—Carvana’s primary business—would be somewhat insulated from immediate tariff pressures.

Garcia elaborated on this point: “To the extent tariffs flow through to steel or to cars, that would be on the new side. The used cars are already out there.” He further noted that transportation is a necessity for most Americans, meaning there aren’t many substitutes for cars, which could buffer the industry from some economic pressures.

Some economists have suggested that tariffs could actually benefit the used car market as new car prices increase, potentially driving consumers toward pre-owned vehicles. Garcia acknowledged this possibility: “To the extent new car prices go up, I think generally that would also pull up used car prices, but less. I think that would likely drive a substitution into used, which is what you’re suggesting, which we expect would be positive.”

However, the CEO maintained that regardless of external factors, Carvana’s focus remains on elements within its control. “The thing that I think that we try to focus on is we know we can impact our customer experience every day,” he said. “We try to stay really focused on that because we feel like we have 100% visibility and knowledge about how that works.”

When asked about the company’s most profitable segments, Garcia emphasized the integrated nature of Carvana’s business model, which includes vehicle sales, trade-ins, and financing. “I think the sum of the businesses is the decision the customer makes. And so I think the sum of the businesses is easier to evaluate the profitability,” he explained.

Looking toward the future, Garcia acknowledged the potential impact of technological advancements like electric vehicles and autonomous driving features but remained confident in the longevity of both new and used car markets. “In the U.S., there’s 270 million used cars driving around. There’s around 16 million new cars sold every year. So it takes a while for that fleet to turn over,” he noted, suggesting that even as technology evolves, Carvana’s business model remains well-positioned for continued growth.