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Cazoo takes swipe at car dealers branding them ‘untrusted’ and ‘permanently impaired’ in investor pack

Time 7 months ago

Online used car dealer Cazoo claims the ‘offline retail experience’ for car buyers is ‘no longer fit for purpose’.

In an investor presentation, the used car dealer – which bought Imperial Car Supermarkets last year and set them up as ‘customer handover centres’ – claims 31 per cent of consumers ‘do not trust car dealers’.

Quoting a survey of 866 used car buyers questioned in the last year, Cazoo says 38 per cent of consumers are ‘reluctant to purchase from their local dealer’.

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As it looks to raise £5bn on the New York Stock Exchange via a listing with Ajax, a special purpose acquisition company, Cazoo has told investors it thinks the shift to online buying supercharged by the pandemic will continue ‘given the poor legacy experience’ consumers have experienced.

In a further dig at car dealers it says ‘offline incumbents’ activity has been ‘permanently impaired’ and believes that dealers suffer from ‘high fixed costs, limited online presence and lack of brand awareness’.

In the prospectus it claims it is the ‘clear UK leader’ in the online used car market, despite rivals Cinch having more cars in stock, and Carzam catching up fast.

In figures revealed in the document, Cazoo generated revenues of £162m last year from sales of 12,000 used cars.


By comparison, Marshall Motor Group generated revenue of £971m from used car sales last year and Pendragon sold more than 91,000 used cars in the same period with revenues of £1.1bn.

Cazoo is predicting revenue of £572m in 2021 and sales of 43,000 used cars.

By 2024 it says it will be selling 210,000 used cars a year in the UK and 114,000 in Europe, generating revenues of £4.7bn.

The online retailer also admits it will not be profitable in the UK until at least 2024 when it expects to make a 3 per cent EBITDA margin.

Further detail in the presentation shows that in January and February 2020 it sold just 1,200 cars – this year in that period that increased to 5,300 cars. This was at the same time the rest of the car industry was also selling cars online as the third lockdown forced dealerships to close.

In the same period last year it was losing £347 for every car it sold – profit per unit now, says Cazoo, is £108 a car.

Pendragon made £1,200 per used car in 2020.

Mike Jones, compiler of the Car Dealer Top 100 list of most profitable car dealers and executive chairman of ASE Global, added: ‘While the valuation is eye watering for a business still in its infancy and yet to turn a profit, it shows the belief amongst investors that the used car market is ripe for online disruption.

‘The market size is undeniably sizeable, however over the past two years many established motor retailers have made huge strides in their online presence and ease of use for customers.

‘As we emerge from the pandemic and reopen the showrooms we will all be watching closely the extent to which customers are happy to continue with a purely online model and the number that revert back to the alternative omnichannel experience.

‘As the Cazoo valuation shows the prize for the businesses who rise to dominate the market is huge.’

Cazoo timeline

Click on the date to read the full story

March 29, 2021 – Cazoo confirms plans to list on the NYSE via a merger with Ajax, a special purpose acquisition company.

Feb 2021 – Cazoo acquires German subscription service Cluno and plots European expansion. As part of the deal it says it will be moving its HQ to Germany.

Feb 2021 – Reports suggest Cazoo founder Alex Chesterman cashed out £100m of shares in the last round of fundraising which was announced in October 2020. Firm refuses to comment.

Feb 2021 – Rumours surface that Cazoo is planning a stock market flotation in New York at a potential valuation of £5bn. The figures baffle industry experts.

Feb 2021 – Cazoo snaps up Smart Fleet Solutions, a vehicle reconditioning and storage specialist which operates from four sites and has 500 staff.

Dec 2020 – Cazoo buys car subscription service Drover for an undisclosed sum with a plan to offer subscriptions to the used cars on its platform.

Nov 2020 – Founder Alex Chesterman takes a swipe at car dealers saying the current sales model is ‘flawed at every level’ in an interview with The Times.

Oct 2020 – Cazoo posts £19m loss for first year of business according to accounts filed at Companies House.


Oct 2020 – Cazoo announces a further £240m in funding taking the total raised to £450m at a valuation of £2bn for the online retailer.

Sept 2020 – Cazoo accused of online-only U-turn as it begins turning former Imperial sites into ‘Customer Centres’ and plans many more around the country.

July 2020 – Car Dealer breaks the story Cazoo is about to buy Imperial Car Supermarkets. A day after our story breaks, the firm reveals the deal has been done.

June 2020 –Cazoo signs deal to become shirt sponsors of Everton in a deal rumoured to be worth nearly £10m. It soon follows it up with a similar deal with Aston Villa.

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March 2020 – Cazoo announces another £100m in funding, taking the total raised to £180m. DMG Ventures, the venture capital arm of the Daily Mail, piles in as part of the fundraising.

February 2020 – Leaked Cazoo investor pack reveals used car dealer plans to sell 217,000 used cars a year by 2025. Predicts it will lose £70m in first three years.

December 2019 – Cazoo launches and announces a total of £80m in funding from venture capitalists General Catalyst and Mubadala Capital.

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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