Earnings Season Shows Some Momentum for Online Car Platforms

Through the past several months, buying a car — used or new — has been, to put it mildly, out of reach.

Inflation has run rampant. Loans themselves — where there were loans to be gotten — were expensive. And as detailed here, delinquencies have been on the rise.

For many of the online platforms seeking to transform car buying, and financing across the ecosystem, the journey’s been a rough and rocky road. Yet earnings season shows that if the industry has not exactly turned a corner, then at least the engines of commerce have not sputtered out completely. Technology is helping lower costs even as the platforms retool.

Vroom reported results on Wednesday (March 13) evening, and though there was no call accompanying the results, the data have some glimmers of positive activity, and some pressures that still remain. As reported, the company is in the midst of a corporate restructuring, and will discontinue its eCommerce operations, and is winding down its used vehicle business, pivoting more fully to finance (through UACC) and artificial intelligence (AI) provided to automotive retail players.

The company said that eCommerce units were up sequentially in the fourth quarter, gaining 5% in terms of number of units. The company has neared the end of the liquidation of inventory through its wholesale channel and said about 100 vehicles remained as of early March. Total revenues gleaned from retail financing — tied to UACC and the network of third-party dealership customers — stood at just about $50 million in the quarter, up 29% from a year ago.

Vroom’s results follow last month’s report from Carvana, which likewise has been leveraging technology to optimize operations and recommendations, done digitally.

Technology in Focus

“On the sourcing side, just like every other area, we’ve got teams that are working every day to pull in more data sources and refine our algorithms for putting the optimal valuation on every single car that we look at,” Carvana Chief Financial Officer Mark Jenkins said during the earnings call. The company’s earnings slide deck noted that costs have been coming down (though retail units sold were down 6% sequentially) was the firm leverages its CARLI technology to streamline everything from inspection of the vehicles to inventory management.

“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,” Jenkins said during the call.

Separately, CarGurus posted results notching 10% revenue growth on its marketplace. Quarterly average revenue per subscribing dealer was up 12% as average unique users gained 11%.

None of this is meant to suggest that the online car platform model — pretty much anywhere you look — is anything but a work in progress. Credit standards are tightening, and delinquencies remain a challenge to be reckoned with. The latest spate of economic data seems to suggest that rate cuts are not coming as soon as some might hope (and at this writing the platforms, we note, are seeing their stocks drop in the low single-digit percentage points). But there were some glimmers of change afoot in the most recent earnings report — and whether they’ll smooth out the bumps in the evolution will be borne out over the next quarters.