As they say, information is power!
Continuing our study on KAVAK, we took on the task of reviewing what KAVAK currently has in its inventory and how its profit margin is distributed because its operation and how they generate money depend on it.
As of today, KAVAK has 10,125 automobiles in its inventory for Mexico, and our inventory study is based on 7,580, meaning our reach is 75%. It's important to always consider during the reading of this article that our sample is of 7,580 automobiles.
Here is some relevant information about KAVAK's inventory that might interest you:
The total selling value of 7,580 units amounts to MXN 2,475 million (selling price), and in our assumptions, we consider that the average profit on the selling price is 30%. Therefore, the total cost of the inventory in Mexican pesos is approximately MXN 1,733 million. But the most interesting analysis regarding KAVAK's inventory comes next:
PRICE SEGMENTATION
A) Cars with a value equal to or greater than MXN 400,000,
Currently, KAVAK has 1,427 cars in inventory with a value exceeding MXN 400,000, of which the selling value amounts to MXN 765 million, the inventory value is MXN 535 million, with a profit margin of MXN 230 million, which corresponds to 31% of KAVAK's total profits.
That is, for each car sold with a value equal to or greater than MXN 400,000, KAVAK earns approximately MXN 161,000 and the 31% of KAVAK profits are housed in 1,427 units in this price segment.
B) Cars with a value from MXN 300,000 to MXN 399,999,
In this price range, KAVAK has 2,196 units in inventory, of which the selling value amounts to MXN 748 million, the inventory value is MXN 523 million, with a profit margin of MXN 225 million, which corresponds to 30% of KAVAK's total profits.
In other words, for each car sold with a value between MXN 399,999 and MXN 300,000 KAVAK earns approximately MXN 102,000 and 30% of KAVAK's profits are housed in 2,196 units.
C) Cars with a value from MXN 100,000 to MXN 299,999
In this price range, KAVAK has 3,957 units in inventory, of which the selling value amounts to MXN 963 million, the inventory value is MXN 674 million, with a profit margin of MXN 289 million, which corresponds to 39% of KAVAK's total profits.
In other words, for each car sold with a value between MXN 299,999 and MXN 100,000, KAVAK earns approximately MXN 73,000 and the 39% of KAVAK profits are housed in 3,957 units.
And what conclusions can we draw from the information:
a) KAVAK already has enough inventory for cars with a sale price of up to MXN 399,999, meaning they, "should not buy more cars in that category." We are talking about around 6,153 cars in this price range in their inventory.
b) That its operational effort originates from "excess inventory" of cars in a category less than MXN 399,999, inventory that is difficult to move and that generates “excessive operating costs that they will not recover.”
c) That your commercial efforts should only be focused on the "sale" of cars in the category under MXN 399,999, since here is the 70% of the company's total profit.
d) That the 70% KAVAK's inventory is made up of cars that they lose value rapidly.
e) KAVAK bought cars from a segment of the population that was heavily affected by the pandemic, and that same segment will hardly be able to buy a car again with KAVAK, with the same characteristics and at a higher cost.
f) That people who sold their car at KAVAK will be able to buy a car “new” on credit at more affordable prices than in KAVAK.
g) That KAVAK rescued hundreds of Mexican families from financial difficulties caused by the Pandemic. “We should be grateful for this.”
In summary, if the 70% KAVAK's inventory is comprised of 6,153 units with an average average selling price of MXN 278,000, KAVAK is definitely in trouble, because that inventory is not going to rotate and loses value day by day and therefore, there is no way to sustain its latest valuation of $4 billion.
In our last article about KAVAK, we will tell you the approximate real value of KAVAK, so stay tuned, and thanks for following us.