Mexico City — Kavak, the Mexican used-car buying and selling unicorn, this week laid off key executives in its Mexican business, including the local country manager, according to people with knowledge of the matter.
Unlike the company’s personnel cuts last June, which affected around 150 people from the operating team in Mexico and Brazil, these layoffs only affect Mexico, where at least five key executives and some managers left the company.
Among the executives who left the firm, sources say, are the country manager for Mexico, Alejandro Guerra and sales director Miguel Rocha, as well as Oscar Villazana, head of origination, the department in charge of the first stage of sales of the US$8.7 billion startup.
Bloomberg Línea contacted Kavak for comment but its communications team declined to respond, referring to the fact that a restructuring process is taking place within the company.
Although last month Kavak announced its expansion to four countries in the Middle East, a former executive at the company said they thought it was ambitious to try to grow in other markets when in Mexico it has yet to reach profitability, and faces problems with customer satisfaction.
According to the source, the company had calculated sales of 17,000 vehicles per month in 2022 and at the end of last year they hired an army of people to process the purchases and sales. However, that expectation was very high and the company only sold 3,500 cars in January, with monthly figures still around that level.
According to a former member of Kavak’s management team, the company is restructuring in Mexico due to the lack of growth in the local market. In addition, the startup has not seen returns on investments in sponsorships of the Mexican soccer team and Formula 1.
This has not translated into car sales, and I understand that this is the reason for the restructuring, a person familiar with the company’s operations told Bloomberg Línea.
Not reaching the planned sales levels, according to this person, has become a snowball, because stocking the cars is expensive, which has caused the closure of between 10 and 15 branches, and which was one of the causes of the layoffs in June.
Another source who worked in Kavak’s finance department told Bloomberg Línea that since February the company began to make downward adjustments in terms of expectations of lower car sales, proposing a lower number of purchases and a higher number of sales in order to have less inventory in stock and try to rotate it as much as possible.
Interviewed last May during a media tour of the company’s facilities, Kavak’s COO Federico Ranero said the firm’s leadership is important for the operation and for solving the customer satisfaction problem it has faced.
Ranero told Bloomberg Línea that “Kavak is not for everyone,” with regards to employee satisfaction.
“This is a highly demanding place where we can’t compromise on average performance or relative to what the market is doing, because we have to do innovative continuously. That means demanding a lot from the team and reaching higher and higher goals,” Ranero said then.
Kavak recently raised the largest debt ever acquired by a startup in Latin America, of $810 million, from HSBC, Goldman Sachs and Santander.
Kavak’s credit line is larger than the amount it raised in its latest round of venture capital investment.
Last year it closed a $700 million Series E round, bringing it to its current valuation of $8.7 billion, which positions it as Latin America’s most valuable unicorn.
--This story was corrected in the first and the third paragraph to reflect the former position of Alejandro Guerra as country manager.