9:06 am, May 10, 2024
Cazoo’s business model was flawed from day one and it left it much too late to put things right.
That’s the view of top accountant David Kendrick, who said the failed online used car sales disruptor-turned-automotive marketplace had burned billions of investor pounds and ended up as ‘a brand name and not much else’.
Cazoo Group announced earlier this week that it intended placing some of its UK subsidiaries into administration.
The move came less than three years after founder Alex Chesterman raised a fist in triumph when the company floated on the New York Stock Exchange with a valuation of some $8bn (circa £6.4bn).
Since then, its share value has been all but wiped out as the business model saw the company lose £704m in 2022 on top of a £544m deficit the year before.
It withdrew from its continental operations as well as ceasing various sports sponsorships.
In March last year, a leaked document revealed that hundreds of jobs were at risk of redundancy. It later entered into talks to restructure its $630m debt.
Cazoo also tried to find more cash to shore up the ailing business, but investors kept their hands firmly in their pockets, and last December came the first admission from Cazoo that it faced going under.
Then came a bombshell announcement last week that it may soon fall into administration.
That was followed on Wednesday by the notice to the US’s Securities and Exchange Commission of its intention to appoint administrators to some of its subsidiaries incorporated in England.
They included Cazoo Ltd, via which its marketplace business – to which it recently transitioned from online used car sales – is conducted.
Car Dealer repeatedly contacted Cazoo for a comment but has not heard anything back.
The stark reality of the situation now is that Cazoo has to appoint administrators or sell the business within 10 days as of two days ago.
Cazoo had 4,500 people working for it in 2021 but that figure has now fallen to some 1,000.
Kendrick, who is chief executive of leading UK accounting network UHY Hacker Young Manchester, said: ‘Cazoo had been teetering on the brink for some time now and it was only a matter of time before cash ran out.
‘The model was flawed from day one and it was far too late before they got enough senior expertise from the car dealership industry.
‘Although they had management expertise from other areas of ecommerce, they started without enough genuine understanding of how the car market and car dealers work.
‘That meant they underestimated the wants of the consumer, the challenges around national delivery and the strength of the local car dealer market.’
Kendrick added: ‘They left it too late before they started trying to adjust their model.
‘All of these factors have contributed to Cazoo’s downfall and billions of pounds of investor money burnt. A sad story and one that has simply created a brand name and not much else.’
Last week’s announcement also included news that Cazoo had missed the deadline for reporting its 2023 accounts – because of pressures on management – and that CFO Paul Woolf had left the business.
His departure followed that of Chesterman last December and former CEO Paul Whitehead who exited in March.
