CarLotz CEO Michael Bor (Photo by Jay Paul)
In January of 2020, Richmond-based CarLotz was on a roll.
Sales had doubled the year before, surpassing $100 million. With eight locations in five states, the company was expanding, with plans to raise capital to grow even more aggressively, recalls CEO Michael Bor. By the end of that February, CarLotz had also launched a new online selling platform, allowing customers to purchase vehicles without setting foot in a showroom.
It was all short-lived. With the pandemic shuttering nearly every facet of the economy that March, CarLotz saw its sales plunge 75% and had to furlough most of its workforce.
Launched in 2011, the used-car company was one of the region’s fastest-growing businesses. Then suddenly it wasn’t.
“We got down to less than 50 people, I think, at our low point,” Bor says. “It was very frightening. … We were really just keeping the lights on, not knowing.”
Bor, a Harvard Business School grad, decided to go all in. The company began the process of going public through a merger with a special purpose acquisition company, which allowed CarLotz to raise $300 million in capital.
“We could have stopped growing. We could have just said, ‘Well, all right, everything’s crazy, let’s not add any more locations,’ ” Bor says. “But we’re building this company for the long term.”
CarLotz’s executives have an unshakable belief in their unique business model — selling used cars on consignment. Essentially a marketing and sales service, the company offers customers the ability to sell privately owned vehicles on their lots for flat fees ($299 up front to inspect, detail and list and $799 when the sale closes). The process nets a higher return than what customers typically get for trade-ins at traditional dealers. Since fees are static, Bor explains, the company has the same incentive to sell a $50,000 Mercedes as it does a $5,000 beater.
Not unlike Richmond-based CarMax, which launched in 1993 but spent its first seven years bleeding red ink while battling billionaire Wayne Huizenga’s AutoNation, CarLotz’s expansion is taking place in less than favorable market conditions. The company went public in January 2021, at the height of supply-chain disruptions and economic turmoil. A year later, the company’s stock is hovering around $2 a share.
Dwindling new-car inventory has sent consumers flocking to used-car dealers, which has driven up the price index for previously owned vehicles by nearly 50%, says George Hoffer, a Richmond-based transportation economist. That might seem like a good thing for CarLotz. But it isn’t.
“You would go to CarLotz because you thought the dealer was giving you the short end of the stick,” Hoffer says. With used cars in higher demand, Hoffer explains, dealers are paying more for them, blunting CarLotz’s appeal.
Bor remains confident that the market will eventually stabilize once new-car supply catches up with demand. It’s just a matter of when. “I don’t know that there’s anybody anywhere in the market who envisions that the challenges we are facing this year [represent] a structural shift in the industry,” Bor says.
In the meantime, the company is preparing for the future. It opened a new headquarters in Scott’s Addition last summer to accommodate its growth. It’s now up to 22 locations, with upward of 500 employees, and there are no plans to slow down.
“We’re continuing to build the infrastructure of the business,” Bor says. “When the economy returns, when the used-vehicle supply chain returns to normal, we’ll have a very strong base upon which we can continue to grow.”
