Now it’s official: Auto1 raised EUR 255 million in the form of a convertible loan in the spring. Corresponding reports have now been confirmed by the Berlin used car startup. The main aim of the capital is to expand the Autohero brand, which is currently of secondary importance. Under this, the company sells vehicles directly to end customers.
So far, Auto1 has mainly bought used cars through its platforms and sold them to dealers. In Germany, the company is on the market under the “Wirkaufendeinauto.de” brand. The company, founded by Hakan Koç and Christian Bertermann in 2012, was able to significantly expand this business last year. In 2019, the Berlin-based technology company reportedly increased its sales by 21 percent from 2.9 to around 3.5 billion euros. Accordingly, more than 610,000 vehicles changed hands over the Auto1 platforms last year – around 88,000 more than in 2018.
Most recently, the company made the headlines in connection with its fintech stake Auto1 FT. At the financial service provider, which was hopefully announced in 2017, a bitter power struggle is raging among the shareholders – alongside Auto1, Deutsche Bank and the alliance and the investment company of businessman Bensen Safa – as research by NewsABC.net showed. The Berlin Regional Court is currently dealing with the clarification.
In an interview with the start-up scene, Auto1 co-founder Christian Bertermann reveals why the Autohero brand should be the main focus in the future, what the company wants to counter the many existing used car offers and why the corona crisis temporarily brought business to a standstill.
NewsABC.net: Today Auto1 announces the numbers for 2019, but one wonders what they say in the times of Corona. How did the crisis affect your company?
Christian Bertermann: We had to stop our business completely. Car sales were in fact not possible because the road traffic offices were no longer open. So even if we had sold cars to dealers, they couldn’t have been re-registered. It took weeks in the different countries to re-register. That’s why we used short-time work.
BI: What is the level now?
Bertermann: We are slowly approaching the pre-crisis numbers. The market has recovered quite well because many feel that their own car is a protection option. This has increased the demand for cheap second vehicles. The auto buying platform Autohero should now come into focus.
Will the previous core business, the car purchase, be subordinated to the new brand at some point?
Bertermann: Both are segments that can get big. We didn’t have a master plan in the first few years after the start and couldn’t imagine where the whole thing was going. That is why the brands have developed separately. Our previous core business is slowly moving into profitability, but we expect growth in the coming years primarily in car sales.
The business is not new, Autohero was officially announced in 2017, and the brand has been experimenting since the end of 2015. Why is the segment now being promoted so strongly?
Bertermann: We always run small satellites in parallel to try out new ideas. At the time, we still focused very much on our previous core business in our business plan. We focused on Autohero only at the end of 2019 and then looked for capital to expand the division. It also took quite a while to teach the company that we would do more than one thing in the future.
BI: The used cars are bought via Wirkaufendeinauto and sold again via Autohero. But part goes to dealers. Aren’t you restricting business?
Bertermann: No. The used car market is incredibly large and fragmented. We are already buying vehicles from remarketing partners and plan to expand this source of additional purchases in 2020 and beyond. These are mainly young used cars. In the future, however, we also want to take over vehicles directly from the manufacturers, for example annual cars.
BI: There are many offers in the used car market. If you search for the term, you will first land on a long line of ads. How should Autohero stand out?
Bertermann: With most of the offers, you still have to look at the vehicle personally. We believe that is not necessary. Instead, we want to present the cars online in such a way that you get a good impression of their condition. The customer would also like to know about the smallest scratches in the center console.
BI: It is important that users trust the brand. After all, it’s about a lot of money. How do you want to achieve that – and doesn’t that mean high marketing costs?
Bertermann: The recipe for success is the same as with Amazon. Among other things, this means being able to deliver quickly. And that’s not easy with used cars. For example, when it comes to logistics. We are therefore building up our own fleet of delivery vehicles. Of course we will also invest in marketing, but we do not expect excessive costs.
BI: So it’s a lot about service aspects. How important are good prices?
Bertermann: Our prices are customary in the market. Rather, people have to realize that you can buy a used car completely online today. As they learned from books 20 years ago. At Wirkaufendeinauto we are also becoming more digital: You enter additional details of the car and then get a binding price. We developed this driven by Corona when it came to minimizing contacts. You don’t change a three billion dollar business for no reason. In the future, the branches will be more delivery points where our employees compare the information provided online.
BI: A total of over a billion dollars have already flowed into Auto1, and now another 255 million euros are being added in the form of a convertible loan. What does the company need so much capital for?
Bertermann: Cars are expensive, and investing in the right people and technology is expensive. We are building Autohero’s business in nine countries at the same time, so that amount is justified.
BI: That means you also buy vehicles with the capital?
Bertermann: Only a small part. We can largely finance the purchase through loans, as the interest rate level is cheap right now. Why did you raise the money through a convertible loan instead of making an equity round? We had different options, from equity to pure credit. Ultimately, we chose the convertible loan because we thought it was the cheapest.