Despite vehicle price increases and tight inventory supplies caused by the global microchip shortage and the lingering pandemic, used-car retailers CarLotz Inc., Vroom Inc., and Shift Technologies, posted revenue gains and unit sales increases in the third quarter.

And all suffered net losses in the three-month period that ended Sept 30.

CarLotz’s tactical changes

CarLotz’s net revenues soared 128% to $68 million and its retail unit sales grew 58% to 2,490, the company disclosed during its Nov. 8, quarterly conference call.

But CarLotz’s net loss in the quarter was $3.47 million compared to a loss of $492,000 in the 2020 third quarter.

Michael Bor, CarLotz’s  co-founder and chief executive officer, said the company made “several tactical changes,” during the year.

After disclosing earlier this year that a key consignor suspended its business with CarLotz, the company deviated from its business model of selling mostly consignment vehicles to selling vehicles mostly bought from auctions.

It also meant that the company acquired vehicles from auctions at a time when wholesale prices were particularly high, he said.

The consignor has resumed business with CarLotz. But many of those auction purchased vehicles remained unsold into the fourth quarter, Bor said.

That put pressure on CarLotz’s retail gross profit per unit, which dropped 57% to $939 in the third quarter compared to the year-ago quarter, he said.

Bor said the company expects to source more vehicles from consumers going forward and is making “good progress” selling its aged inventory.

CarLotz’s new partner consigns Telsas

He also said CarLotz has added new corporate partners.

Among those partners is an unidentified West Coast finance company that is consigning Telsa electric vehicles, and other vehicles to CarLotz.

The relationship started with the finance company sending a variety of two- to four-year-old Tesla electric vehicles to CarLotz’s Bakersfield, Calif., location as a testing ground. The finance company was pleased with the results and increased the volume of Teslas consigned to CarLotz.

Those EVs are being sent to CarLotz’s recently opened hub in Pomona, Calif., and its other locations around the country, Bor said.

The non-Tesla vehicles sent by the finance company generally stay in or near CarLotz’s West Coast market, he said.

“It’s been a great new account for us,” Bor said.

Vroom: revenue and net loss increase

Vroom also saw sharp gains in revenue, number of vehicles sold and the number of vehicles it purchased from consumers.

Vroom’s total revenue grew 177.6% to $896.7 million in the third quarter.

Most of that growth was attributed to Vroom’s ecommerce platform which generated revenue of $701.6 million, up 216.4% in the quarter on ecommerce unit sales of 19,683, representing an increase of 123.1%.

The company’s ecommerce gross profit per unit grew 17.0% to $2,560 in the quarter, but it’s net loss increased 159.2% to $98.1 million.

During Vroom’s Nov. 10 conference call, CEO Paul Hennessy said the company is experiencing reconditioning constraints at its third-party reconditioning centers due to labor shortages and historically high demand levels.

He said the company likes the option of having third-party reconditioning sites and views the problem as “transitory.”

Investing in reconditioning

He said Vroom has been helping add headcount at its partners’ facilities and its own facilities and will invest in a “half dozen or so” dedicated reconditioning center locations as it continues to grow.

The Vroom-owned reconditioning centers will be strategic in location, size and ability to coordinate with Vroom’s logistic requirements, Hennessy said.

“We think of these as $100 million, maybe as great as $150 million in total capex, not $2 billion,” he said.

“So our hybrid approach, our asset-light approach, still rules the day here so that we’re aligning  the needs of the business and being judicious in our capital deployment.”

Vroom opened its 30th “last mile” hub in the third quarter ahead of its 2021 target schedule, Hennessey said.

Last mile is a program under which Vroom customer advocates deliver vehicles in Vroom branded trucks to customers’ driveways and show customers how to operate features of their newly acquired vehicles.

Forty-one percent of Vroom vehicles are delivered with its last mile experience, up 15 percentage points when compared to the second quarter of 2021, the company said.

Shift shifts its hiring strategy

Shift’s total revenue in the quarter was $179.8 million up 200.1%  and it retailed 6,487 ecommerce units, up 120.2%. Its ecommerce gross profit per unit rose 111.0% to $1,150 and its net loss was $37.4 million, compared to $23.3 million in the year ago period.

Shift has had to deal with the same labor issues “that everybody else in the world and the country has,” and has a result, changed its hiring strategy, said its co-CEO, George Arison, during company’s third quarter earnings conference call, on Nov. 11.

Instead of hiring people in the few weeks prior to needing them, it is hiring people in the fourth quarter to fill specific roles, such as in field operations, reconditioning and logistics, in the first quarter of 2022, Arison said.

“Once we do and kind of have this larger team, we’ll be in a really good place for the rest of the year,” he said. “We thought that that was a prudent decision in light of the very tight labor market that we’re dealing with.”

More reconditioning capacity

Shift CFO Oded Shein said the company has made great progress increasing its reconditioning capacity steadily throughout the year and reconditioning is no longer a constraint on the company’s ability buy, process and sell cars.

Shift is in the process of putting a new facility in Northern California to replace its San Francisco location, a move that will increase the capacity even further, Shein said.

“We continue to do this working on opening a new facility in Texas, and then as we launch further new markets we’ll be able to open facilities there as well,” he said.

On Feb. 1, co-CEO Toby Russell is leave his current position and become an advisor and member of Shift’s board, the company said.