SoftBank-backed Kavak lays off staff, makes ‘significant’ cuts -internal email

By Valentine Hilaire

MEXICO CITY (Reuters) – Mexican online used-car dealership Kavak has made significant spending cuts and laid off staff as it prepares for a challenging 2023, according to an internal email sent Friday and seen by Reuters.

Carlos Garcia, the start-up’s chief executive, said in the email that Kavak has made “significant cuts in expenditure … reducing the size of the team accordingly.”

The email did not specify what regions were affected by the cuts or the number of people laid off. A company spokesperson confirmed the email had been sent but declined to provide additional details.

The email pointed to a “complex macroeconomic context that projects a challenging 2023 in many sectors” and cited rising interest rates, inflation, war, and a contracting economy.

“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,” the email said.

Kavak, which operates in 10 countries and has raised funding from Japan’s Softbank, among others, also said in the email that it would announce “important organizational changes.”

“We now need to focus on doing fewer better things,” Garcia said in the email, laying out a 2023 plan that looks to limit inventory, focus on the most profitable business lines, improve client retention and move products faster with more warranty options.

Garcia also addressed customer complaints and vowed to boost services: “Today it is very difficult to contact us, and we are not efficient in providing the right solution during the first interaction. This needs to change.”

Kavak – which buys used cars, fixes them and resells them – in October announced a $130 million plan to expand in the Middle East and boost its presence in emerging-market countries.

(This story has been corrected to show cuts already happened)

(Reporting by Valentine Hilaire and Sarah Morland, editing by Deepa Babington)