It must be acknowledged that the team at Kavak.com has made a commendable effort to improve their purchasing strategy and reduce inventory. As of last year (November 2022), their inventory stood at 10,125 units, and as of November 2023, it has decreased to 7,485 units, representing a 26% reduction – a genuinely substantial percentage! However, it's not enough.
Kavak.com still faces inventory turnover issues. It's challenging to believe that a company with such a significant investment thinks it can make money by selling older cars. When we say older cars, we're referring to models predating 2018. Kavak.com inventory with cars older than 2018 constitutes 67% of the total inventory, amounting to around 5,050 cars. The remaining 33% comprises models from 2019 to 2023, totaling 2,435 cars. You can review the tables below with the total number of cars per year.
The efforts made so far are not and will not be sufficient because there's no way to move those 5,050 cars. Their average selling price is MXN 261,000, and with that amount, customers could make a substantial down payment to buy a new or more recent model.
Their business model still isn't working. They’ve become a catalog of cars rather than a functional platform capable of selling cars online. Until Kavak.com understands that its business model needs to change, they will continue to lose a significant amount of money. Investors who trusted the Mexican unicorn are at risk of losing their money.
Why not create a single facility to store all the cars located in shopping centers and stop paying rental spaces? This would transform debt and expenses into an investment! There are various paths to explore; it only requires the owners and investors to decide.
We are Trending Business Advisors, and we will continue to monitor the financial situation and business model of the Mexican unicorn.
