Mexico-based digital auto retailer Kavak is bracing for a difficult 2023, with significant spending cuts and staff layoffs, according to an internal email sent last Friday, Reuters reports.

The layoffs come as no surprise, as the AIM Group reported on them in early November.

In last Friday´s email, Kavak founder and CEO Carlos Garcia (LinkedIn profile) pointed to a “complex macroeconomic context that projects a challenging 2023 in many sectors,” citing rising interest rates, inflation, war in Ukraine 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,” he added. However, it did not specify the regions that would be affected.

The email also mentions that “important organizational changes will be announced.”

This represents quite a shift in strategy from just last month, when the company unveiled plans for a $130 million USD expansion into the Middle East.

Kavak seems to be taking a “back to basics” approach: Garcia also said that improving customer service would be a priority.

“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,” he said.

“We now need to focus on doing fewer better things.”

Garcia added that in 2023, the company would look to limit inventory, focus on the most profitable business lines, improve client retention, move products faster and offer more warranty options.



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