6:59 am, April 1, 2023
Car dealers and industry experts say they are ‘not surprised whatsoever’ at Cazoo’s recent bombshell financial results which revealed the firm has lost more than £1.2bn in the last two years.
Accounts published this week laid bare the full extent of the used car dealer’s financial difficulties, with losses of £704m racked up in 2022.
That figure, teamed with an eye-watering £544m loss in 2021, has left the troubled retailer facing huge cuts in a battle to keep afloat.
Since launching, Cazoo has continued to rub traditional dealers up the wrong way and the company’s recent struggles will come as no shock to those working in the industry.
Among those to be critical of the outfit has been Car Quay’s Jamie Caple, who previously labelled Cazoo ‘naive’ at Car Dealer Live.
Reacting to the latest set of financial results, he told Car Dealer: ‘It’s not surprising whatsoever.
‘Taking into consideration their colossal marketing spend and the high prices they seem to offer for buying stock to retail, this was inevitable.
‘Looking at their numbers it’s mind blowing what they’ve failed to achieve.
‘We sold approximately 2.5 per cent of the number of vehicles they did in the year. Their losses would equate to us losing about £18m which is a phenomenal number.’
He added: ‘How long before they get eaten up by a competitor or they simply go out of business?
‘It is wild seeing their handover centres getting eaten up – for a song no doubt – by well established and profitable players in our trade.
‘Where do they go from here? It’s hard to see a way forward for them now.
‘I wouldn’t want to be a member of their team or an investor who bought in at the top or anywhere near the the top.’
Also offering his view on Cazoo’s recent struggles was Swansway Group director Peter Smyth. Speaking on the most recent episode of the Car Dealer Podcast – which you can listen to below – he said 2022 had been an ‘absolute shocker’ for the used car dealer.
‘There’s an age old adage in business,’ he told host James Baggott. ‘If you’re going to have a bad year, have an absolute shocker.
‘Throw absolutely everything in at it so that when you start to make financial predictions for the next year, you can actually meet your predictions.
‘I’ve got to say this will be a first for Cazoo and their team that Alex [Chesterman] is so proud of because he’s never yet made a prediction that he’s met.
‘I think he said that by the end of this year they’d be at £600 a unit and they’re now only at £400 a unit.’
He added: ‘The loss didn’t shock me because I have closed down businesses that that haven’t worked for us over the years and it always costs you more than you think it’s going to.
‘There’s always a bit of fallout at the end that will dribble into 2023, as far as he’s concerned. So if it were me, I would make sure that in that £700m loss I’d covered most of the bases so that I can start giving some sorts of good news in Q1 2023, but it remains to be seen.’
‘How is it even possible to lose that much money?’
Following the release of the accounts, several dealers took to social media to discuss how and why Cazoo has got things so wrong.
Nigel Hurley, CEO of Carshop, said: ‘All excuses for financial performance being removed. We’re investing for growth, Covid, we’re “right sizing”. I find that comment particularly interesting as they “wrong sized “ it from the start! Massive growth followed by massive retreat and all the asssociated losses.
‘I can’t imagine what the marketing cost per retail unit is but I bet it’s huge. As this spend comes down, so will enquiry rate and consequently sales. Anyone can sell cars and make no money but the skill is doing both.
‘The next 18 months with new experienced leadership will be interesting to watch.’
Allan Shotliff, new car sales manager at John Clark Motor Group in Falkirk, added: ‘I can’t understand how it’s even possible to lose that much money when the rest of the motor industry has been posting record numbers.
‘I feel for the staff on the ground because the upper management must be going round in circles. Still around at year’s end I wonder?’
Meanwhile, Chris Hurley, transaction manager at Marshall Volkswagen, expressed his sympathy with those affected.
‘I don’t feel sorry for the bosses at the top who thought it would be easy to flirt with selling cars on a “stack em high, sell em’ cheap” model.’ he said.
‘But real (normal people like you and me) will be losing their jobs by the boat load. It’s not fun and it’s probably a very scary time for the regular peeps in Cazoo.’
Steve Young, director and research group ICDp, added: ‘Never mind… the loss is only the same as the whole turnover of a group like Swansway – nothing to worry about… Perhaps a more measured approach might have destroyed less shareholder value?’
Chesterman ‘very proud’
Founder and CEO Alex Chesterman – who banked a reported £100m from the sale of shares before Cazoo listed – said he was proud of what Cazoo has achieved so far.
He said: ‘During the year we made a number of important strategic decisions to change gear from fast-paced growth to focus on improving our unit economics in the near term.
‘I am very encouraged by the pace of the team’s delivery in rightsizing our headcount and operational footprint which we have now completed in order to drive higher margins going forward.
‘I am incredibly proud of everything the team at Cazoo has achieved since launch.
‘The past three years have shown that there is a significant appetite for buying and selling cars online and that our proposition is resonating strongly with consumers, having now sold over 120,000 cars entirely online in the UK.’
Learn more about the rise and fall of Cazoo here.
