The second-hand car market is not what it used to be. Gone are the days of shady deals, here-today, gone-tomorrow salesmen and old jalopies glossed up to look like new. Gone also, it seems, are the clichéd sales pitches made by archetypal used-car salesmen. That’s because the business has largely gone digital, and it’s booming more than ever.
Auto1, an online marketplace for second-hand-car sales, is probably Germany’s least-known successful startup. But if founders and co-chief executives Hakan Koç and Christian Bertermann have their way, their model will transform the industry.
Founded in 2012, the company is on a steep upward curve. Valued at €2.5 billion ($2.9 billion), the Berlin firm already has 3,000 staff, 800,000 customers and 35,000 car-dealer partners across Europe. Last year’s turnover was €1.5 billion, up 100 percent on the previous year. “We’re achieving healthy growth,” says Mr. Bertermann. Over 330,000 cars have been sold via the site since the beginning of 2017.
“An IPO is just a form of finance. As long as we can raise money privately, that’s not what we want.”
Serious investors have taken a good hard look at Auto1, and like what they see. This summer, the company raised €360 million in new funding. The money – the largest-ever single investment in a German startup – came from venture capital funds Target Global, Princeville Global and Baillie Gifford, as well as mainstream banks.
“We’re developing our business model in a focused, concentrated way,” said Mr. Koç, in the two founders’ debut newspaper interview. “We offer a platform for anyone who wants to buy or sell a used car.” The founders say their medium-term aim is to capture 10 percent of the European used-car market, estimated at around €350 billion.
Their model is simple: A car owner lists details about their vehicle on the site, which generates an initial valuation in just a few seconds. The owner then takes the car to one of 350 official locations in Germany, where it is assessed in detail and Auto1 offers a binding quote. Bought vehicles are then sold on to one of its partner dealerships, usually traditional used-car sales lots. The company prides itself on offering to buy every single car it is tendered, even if only for scrap metal.
Unlike competing online marketplaces, such as wirkaufendeinauto.de (we buy your car), Auto1 targets dealers rather than private customers, making it a sort of “dealership for dealers.” Its business model invites them in and offers them benefits. Mr. Koç says the site lures dealers with a far greater range of cars than otherwise available, as well as with quick delivery. Auto1 also offers financing with credit lines of up to €100,000. “It is really important for us that our network of trusted dealers keeps expanding,” said Mr. Koç.
So how long will this summer’s €360-million injection last? Mr. Koç points out that, unlike many startups, the company is already profitable in its core markets, including Germany. “That means our need for new capital will depend on how quickly we expand in other markets. Currently we are active in 30 European countries, and will add more,” he explained.
With those kind of numbers, the young company would seem a perfect candidate for an early IPO, but its founders say they have little interest. “We’re not planning a flotation,” said Mr. Koç bluntly. His colleague added: “For us, an IPO is just a form of finance. As long as we have no problem raising money privately, that’s not what we want.”
The two founders each own more than one-third of Auto1, with the remainder parceled out between various venture capital funds, including early Facebook investor DST Global. But they say even a massive payday won’t tempt them to go public.
The foundation of the company owes a lot to Mr. Bertermann’s grandmother, who asked him to sell her Mercedes-Benz five years ago. Confronted with confusing conditions and sketchy offers, he and Mr. Koç, both experienced digital executives, decided to establish the site.
But the pair’s real love is for how digital data can transform business. “With our Europe-wide data sources, we know very quickly where a particular car will sell best. And then that sales information flows back into the algorithm,” said Mr. Koç.
Peter Brors is Handelsblatt’s deputy editor in chief, based in Düsseldorf. Brían Hanrahan adapted this story for Handelsblatt Global. To contact the author: email@example.com