Vroom, a company that went public in 2020, has announced a significant shift in its business strategy. The company is shutting down its online used car marketplace and redirecting its resources and capital into two business units focused on auto financing and AI-powered analytics. This move will result in about 800 employees, or 90% of its workforce, losing their jobs, according to a regulatory filing.
Key Takeaway
Vroom is making a significant strategic shift by shutting down its online used car marketplace and focusing on auto financing and AI-powered analytics, resulting in a major workforce reduction.
Suspending Used Car Transactions and Selling Inventory
Vroom has stated that it will suspend all used car transactions through vroom.com and plans to sell off its used vehicle inventory to wholesalers. The company has not yet determined the cost of this wind down, citing uncertainty about the selling price of its used vehicle inventory, as mentioned in the regulatory filing.
Concentration on United Auto Credit Corporation and CarStory
Following the shutdown of its online used car marketplace, Vroom will concentrate on two other businesses it owns and operates: United Auto Credit Corporation and CarStory. United Auto Credit Corporation is an automotive finance company, while CarStory has developed an AI-powered analytics and digital services platform for automotive retailers. Both of these businesses will continue to operate as Vroom’s primary focus shifts.
Surviving in a Competitive Landscape
Vroom was part of a wave of U.S. startups that aimed to disrupt used car sales and the traditional dealership model. Despite the challenges, Vroom survived and emerged as a competitor to Carvana, which went public in 2017. However, the company’s share price has experienced significant fluctuations since its IPO, dropping more than 60% over the past year and currently hovering at about $0.32.
Acquisitions and Strategic Shifts
During its high-flying stock days, Vroom acquired Vast Holdings, including CarStory, for $120 million in cash and stock. The acquisition was initially seen as complementary to Vroom’s e-commerce business, utilizing machine learning and AI to analyze vehicle listings. Additionally, Vroom acquired United Auto Credit Corporation in October 2021 for $300 million in cash.
