The Abu Dhabi and Singapore sovereign wealth funds have teamed up with billionaire George Soros to pile into the online car-selling goldrush as they backed a £1 billion fundraiser to push a new digital rival to Cazoo valuing the group at around £5 billion.
The investors are injecting money into Constellation Automotive, the owner of WeBuyAnyCar and British Car Auctions and the funds will go into pushing the expansion of Cinch, an online only used car seller it launched in October.
One of the biggest ever private fundraisers by a UK company comes just weeks after Cazoo left City investors agog when it launched a Wall Street IPO deal valuing it at $7 billion a little over a year since it launched.
Sources at Constellation, owned by UK private equity fund TDR Capital, think it has stronger prospects than Cazoo because its long-established car buying businesses WeBuyAnyCar and BCA can provide Cinch with far more cars to sell.
However, the Evening Standard understands that Cazoo is planning to launch a similar service in July, under which customers will be able to sell it their cars online with a no-quibble price guaranteed online.
Currently, Cazoo customers can only do this for part-exchange when they buy a car.
Cazoo sources say the move will dramatically boost its inventory and help boost its sales as it grows its UK and European presence.
Cinch was today listing 3738 cars for sale on its website compared with Cazoo’s 3155.
The online used car market is one of the hottest in Europe for investors who see it as the last major consumer purchase that has barely moved online.
Of the e350 billion a year of used car sales made in Europe now, only around 1% is done online.
Cinch is raising money from Abu Dhabi Investment Authority, GIC of Singapore, Newberger Berman and Soros Fund Management.
The Constellation group trades more than 1.5 million vehicles with a value of £12 billion a year across 10 European countries.
The valuation may go some way to answer critics in the City of Cazoo’s recent US fundraiser which was done as a so-called Spac deal when valuations of the Special Purchase Acquisition Companies was riding high over the early Spring.
Cinch’s fundraise comes after Germany’s Auto1 raised e1.8 billion in a Frankfurt listing with a plan to pump e750 million into its retail business Autohero.com.
All players in the online sector point to the share price success in the US of Carvana, whose share price has gone from $11 in 2017 to $241 today, valuing the group at $42 billion even after its recent falls alongside most Wall Street tech stocks.
Critics including traditional UK car dealers are concerned the online-only businesses will struggle to make a profit, given the hundreds of millions of pounds and euros they are likely to have to spend on marketing to acquire customers.
However, the likes of Cazoo counter that they have more efficient operations in cheap, remote locations like Amazon, and can operate with far fewer staff because they do not have to support networks of dealerships.