Online car retailer Cazoo is performing a u-turn out of its mainland European business in a move to focus solely on the UK.
The firm, founded by serial entrepreneur Alex Chesterman, has said it will be pulling out of Germany and Spain, and that it is in consultation with employee representatives in France and Italy about winding down its businesses there.
The move comes after Cazoo launched a strategic review of its business aimed at identifying a way of maintaining profitability and preserving cash without the need to raise external funding.
Now the company will focus on the UK car market, which it said saw 8 million tranactions a year at a value of £100 billion.
The price of second-hand cars has rocketed in recent years, and particularly during the pandemic, during which global supply chain problems hampered new car production, in turn leading to used car prices spiralling.
Data from Moneybarn showed that the price of some used cars had risen by around a quarter in the past year, with the price of a Vauxhall Astra jumping 26.7% to £24,315 in just 12 months, and its Sports Tourer sibling rising 23.6% to £25,515 in the same period.
The Audi A4 Saloon, Porsche Cayman, Audi A4 Avant, Nissan Micra and Peugeot 308 SW have all seen their prices rise by around a fifth since 2021, Moneybarn added.
Cazoo said that its retail sales had more than doubled year-on-year in July and August despite the increasingly challenging economic backdrop, meaning it was confident of achieving its goal of securing 5% or more in terms of market share in the UK.
The company said it expected its European exit to achieve cash savings of more than £100m net of any wind down costs by the end of 2023.
The EU represented less than 10% of the company’s revenues, meaning the firm didn’t expect it to have a large impact on its 2022 revenue and unit targets.
Chesterman, who previously founded DVD rental firm Lovefilm and property website Zoopla, said focusing solely on the UK should still enable the company to achieve its goal of hitting profitability by the end of 2023.
“We have built a market leading platform, team, brand and infrastructure in the UK, where we have now sold over 90,000 retail units since launch, despite the challenging macroeconomic backdrop,” he said.
“The strong customer demand we are seeing in the core UK business gives us high confidence in the future opportunity and the decision we have taken today to withdraw from mainland Europe ensures that our balance sheet remains strong and that we have a plan which we believe no longer requires any further external funding.”