Posted on Monday, Jun 20th 2016
According to IBISWorld, the global market for cars and automobiles is expected to grow 2.5% to $9 trillion. Over 65 million new and used vehicles are expected to be sold in 2016 through dealerships, commission agents, and car auctions. AUTO1 Group has gained entry to the Billion Dollar Unicorn Club by targeting this fragmented market.
AUTO1 Group’s Offerings
Berlin-based AUTO1 Group was founded in August 2012 by Christian Bertermann and Hakan Koç to change the way cars are bought and sold by connecting buyers and sellers end-to-end. It essentially aims to build a stock exchange for used cars, using technology to connect buyers with sellers.
The idea for AUTO1 Group came from the frustrated attempts of Bertermann to value and sell his grandmother’s two cars – a Mercedes 190 and a Golf IV 1.6. Having just quit his job at Groupon, he was looking to start a new company. Together with Koç, who had worked at Rocket Internet SE and Home24 AG, he decided to create an online business to address the gap in the used car market. In 2014, former Groupon SVP Chris Muhr joined them as co-founder and Chief Operating Officer.
AUTO1 Group buys used cars from OEMs, dealerships, and its own business units and sells them into its global dealership network. It also buys cars from individual sellers based on its own inventory and that of dealerships and manufacturers that use its platform. Prices are determined by its proprietary CORE pricing algorithm. The entire service including inspection and valuation is free of charge. It then sells them to dealers for a higher price.
Auto1’s differentiation from other dealers is that it uses its own cash to buy and store the cars until their sale to dealers. This speeds up the process for sellers from an average of 90 days in Europe to about 10 days.
AUTO1 Group’s Financials
AUTO1 Group had an annualized run rate of over $850 million and is growing eight times y-o-y in 2015. Its monthly revenues are at $70 million per month. It established its US business in January 2015 and saw strong traction with annualized run rate of $25 million.
Germany is its largest market, accounting for 35% of revenue. In 2015, the company claimed that the core business is profitable, but it is spending significantly on international expansion, with a focus on the US market.
The market is highly fragmented with over a million companies and no dominant player. Its competitors include CarMax Inc. and Manheim Auctions Inc. in the US and Emil Frey AG and AVAG Holding SE in Germany. Analyst James Albertine says that while there are several growth opportunities in the US market, quite a few online models falter because they are not attached to a successful brick-and-mortar operation.
AUTO1 Group is venture funded and has raised over $200 million so far from investors including DST Global, DN Capital, Piton Capital, and Mutschler Ventures. It raised $100 million in early 2015 at a valuation over $1 billion. In July 2015, it was looking to raise $500 million more in debt and equity to fund its international expansion plans.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
Photo credit: Autoviva/Flickr.com.
This segment is a part in the series : Billion Dollar Unicorns
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