Bloomberg — Kavak, Latin America’s biggest startup, is reducing headcount and expenses in the face of slowing growth after pushing to expand across the globe last year, Chief Executive Officer Carlos Garcia Ottati told staff in an email.
After the used-car seller geared up in 2021 for a “mid-term hyper growth scenario,” Garcia Ottati said the company had been forced to cut staff and fire managers due to higher interest rates, inflation, war and slowing economic growth that have created a “challenging 2023.”
“In the next few weeks we will be announcing important organizational changes to unleash, even more, our potential as a team and take us to the next phase,” Garcia Ottati wrote, according to a memo seen by Bloomberg.
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“As the next few months are difficult to forecast, we have set the company on a quicker path to profitability and made strategic decisions to redesign the structure of resource allocation, making significant cuts in expenditure, and reducing the size of the team accordingly.”
Garcia Ottati did not detail how much of the company’s staff has been cut or if more firings were coming. The Mexico City-based startup had reached around 8,000 employees earlier this year.
Auto dealers and lenders have been hit hard as central banks push interest rates higher to rein in inflation, and used-car prices fell from their record highs as supply constraints eased. In the US, Carvana Co. (CVNA) has lost 97% of its value over concerns about its liquidity, and CarMax Inc. (KMX) shares have plunged 49% on declining sales.
The company was valued at $8.7 billion in a funding round that concluded in September 2021, making it one of a handful of so-called unicorns, or startups valued at more than $1 billion, to hail from Mexico. It secured $810 million in debt financing two months ago with HSBC Holdings Plc, Goldman Sachs Group Inc (GS) and Banco Santander SA.
During 2022, Kavak had announced expansions into Colombia, Chile and Peru as well as the United Arab Emirates, Oman and Saudi Arabia on top of its operations in Mexico, Brazil and Argentina. Garcia Ottati said the company had a strong balance sheet to continue to grow across its global footprint.
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