The coronavirus pandemic has created a conundrum for how we get around safely. On one hand, social distancing and fear of infection has made public transport an unattractive prospect for many, while on the other hand, job losses and economic insecurity is a barrier to buying a car.
Drover, a London-based car subscription platform, believes it has the answer to the problem of avoiding public transport without committing to buying a car outright or on financing.
The car-as-a-service startup announced £20.5m ($26.3m) in new funding this month, bringing its investment to date to £27.5m. The recent B-round was co-led by Target Global, RTP Global and Autotech Ventures, with existing investors Cherry Ventures, bp ventures, Partech, Version One, and Forward Partners also participating in the round.
“Drover offers an attractive and affordable alternative to car ownership, which has proven to be extremely robust during the recent CoVID-19 crisis with record high subscriber bookings,” Anton Inshutin, a partner at RTP Global said in a statement.
The COVID-19 pandemic, which forced plants and dealerships to shut for a couple of months this spring, and caused UK car sales to plunge to levels not seen since 1946, has given Drover a boost.
“While in May only 13,000 new personal cars were registered in the UK … Drover more than doubled the number of new subscriptions sold compared to a year ago - finishing Q2 with a record high in revenue,” the company said in a statement.
“Covid was a really interesting time for us,” Drover chief executive Felix Leuschner told Yahoo Finance UK. “April was a slow month, but apart from the heavy lockdown period, May and June were our best months ever in succession.”
“You kind of expect that for a growth company every month should be the best month, but still I think that for us it was great to see that suddenly getting a car online was a lot less crazy for a lot more people that it maybe felt 12 months ago,” he said.
Drover claims it is the EU leader in car subscriptions, with a turnover of €30m last year.
The Amazon of Cars
Leuschner, whose goal is to make Drover the “Amazon of cars,” points out that car buying is one of the last big areas of retail that has not moved online.
“It’s a market dominated by brick-and-mortar retailers – car dealerships – and I think broadly speaking it’s fair to say that car dealers don’t have the best reputation, especially in the used cars area, and it is not an experience that people enjoy,” he said.
Those getting their cars through Drover can swerve the dealership visit completely since the car is delivered to their door.
Leuschner says his business sits between car rental, which tends to be short term, and traditional car leasing, which requires down payments and tends to have very fixed lease terms.
“We’re more in the market where people otherwise would buy a car, typically a used car, and buy it on finance,” he said, adding that the average Drover customer is nearly 20 years younger than the average new car buyer in the UK, who is 56-years-old.
The process works by first picking a car on the Drover website, then choosing how long you want it for, from between one and 24 months, adding on insurance or extra mileage of required, and going to the online check out. Maintenance is included in the single monthly payment, and customers can return the car at any point.
Drover, which was first founded in 2016 serving business customers (like Uber drivers), then switched to supplying cars to consumers. The consumer subscription service now accounts for 85% of its business.
The company does not actually own the cars, sourcing around two-thirds of its inventory from dealerships, in a partnership which allows dealers to get vehicles off their lots. However, the dealers don’t hold inventory for Drover: it works as a “just in time” system, which means they free up whatever vehicles when they have in stock.
“Our business model has certainly evolved,” Leuschner said. “Today we have a lot of data on cars, and how the cars going to perform et cetera.”
“We have historically taken no risk, but that means we have taken about 15% or so on transactions,” he explained. “But now, basically knowing a lot more what customers want and when, we have started to take a lot more risk – so we still don’t own vehicles but we provide a lot of our suppliers with mutualisation guarantees.”