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  "documentTitle": "Carvana Co. (CVNA)",
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  "presentationDate": "2023-06-15 00:00:00",
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      "text": "Ironically, rather than building a business that uses technology to smooth out the challenges of operating in the used car industry, we believe Carvana built one that amplified it.",
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      "text": "inventory. Lastly, there is no macroeconomic feedback loop built into the model capable of predicting something like the effect of 500bps of interest rate hikes within a relatively short period of time.",
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      "text": "These qualities mean that despite Carvana’s promotion of its technology and data, the company’s predictive analytics only work when (big surprise) things are easy to predict and analyze. In other times – when an executive team lacking in auto industry experience needs a quick, effective algorithm to guide decisions – we believe that these models produce flawed, delayed underreactions.",
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      "text": "Going forward, another problem with Carvana’s data-reliant business model is that, much like its executives, it is imbued with limited, relevant experience. From 2014-2021, Carvana sold just over 1 million retail vehicles. 765k of these cars, however, were sold from 2H19 until the end of 2021, meaning the vast bulk of Carvana’s internal data comes from the abnormal used market conditions of the pandemic. How useful and predictive this data is in the current fragile and uncertain market remains to be seen.",
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      "text": "When there is a surprise to the upside, like what was seen after the initial shock of the pandemic, this underreaction results in delayed, slapdash scaling up of operational and logistics to meet unexpected demand. A serious problem, but at least one that can be spun to the market as addressable. When the environment swings unexpectedly badly, the consequences are disastrous – massive amounts of unneeded logistics capacity is bought and inventory goes unsold for far too long before being written off. Ironically, rather than building a business that uses technology to smooth out the challenges of operating in the used car industry, we believe Carvana built one that amplified it.",
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      "text": "— Ernie Garcia III, CEO Carvana, 1Q23 earnings conference call",
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      "text": "What were our differentiators early on, are no longer differentiators at all. Like, everyone will deliver a car to you now, everyone has a return policy...Everything that made Carvana what it was...CarMax? They’ve already caught up.",
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      "text": "We did just become everyone else... It [NPS] is horrible...Even when they were reporting on it, it was just smoke and mirrors. You’re asking people, ‘how was the experience?’ right after they’ve been given the car. But you register a car 45 days later and they were failing on registering like 40% of vehicles so yeah, you ask someone the day after they’ve gotten this cool car, but in 45 days they can’t legally drive it. They haven’t dealt with issues that may have been missed in the inspection process when you’re asking them ‘how was the experience?’ but when you actually take the NPS 45 days later you’re worse than a lot of folks.",
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      "kind": "quote",
      "text": "Because we do have a differentiated customer offering that customers love. Our NPS [Net Promoter Score] is high.",
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      "text": "\"Because we do have a differentiated customer offering that customers love. Our NPS [Net Promoter Score] is high.\" — Ernie Garcia III, CEO Carvana, 1Q23 earnings conference call. \"What were our differentiators early on, are no longer differentiators at all. Like, everyone will deliver a car to you now, everyone has a return policy...Everything that made Carvana what it was...CarMax? They've already caught up.\" — Unattributed expert source.",
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      "kind": "title",
      "text": "Carvana is Neither Disruptive nor Differentiated, and Competition Has Caught Up",
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