Japan’s Softbank has purchased a one-fifth stake in Auto1, Germany’s largest used car trading platform, and has ambitious plans to bring the company to the US and Asian markets to sell second-hand cars in concert with ride-hailing app Uber, which it also controls.
“We plan to turn Auto1 into a global company,” said Rajeev Misra, a former Deutsche Bank executive who now runs Softbank’s Vision Fund. “We want to take the company to the US market, to China and Japan.”
Auto1, which is now valued at €2.9 billion ($3.6 billion) after Vision’s €460 million purchase of 20 percent of the company’s shares, has joined the ranks of so-called startup “unicorns” worth more than $1 billion. In Europe, it is behind only music streaming app Spotify, valued at $16 billion, and the UK’s Global Switch, which is valued at $7 billion, according to CB Insight, a consultancy that specializes in startups.
You have to have a winner take all mentality. Rajeev Misra, CEO, Softbank Vision Fund
With its huge portfolio, Softbank has become the global leader in ride-hailing companies, taking a 15 percent share in Uber earlier this month to wind up as that company’s largest shareholder. It also has a large stake in Didi Chuxing, the ride-hailing company that has controlled the Chinese market since Uber pulled out in 2016, as well as ride-hailing apps Ola in India and Grab in Singapore.
In an interview with Handelsblatt, Mr. Misra did not spell out how Softbank would leverage its stake in Uber to benefit Auto1 in the US. Financial sources, however, told Handelsblatt that the German startup could form joint ventures with Uber, Didi, Chinese online marketplace Alibaba or other firms in which Vision Fund owns stakes. Teaming up with Uber, for instance, would make it easier for Auto1 to enter and grow in the US market.
Auto1 faces stiff competition from entrenched American players, notably, cars.com, which is traded on the New York Stock Exchange and has a market cap of $2.1 billion, and autotrader.com, which is owned by Cox Enterprises, a conglomerate with broadcast as well as auto firms such as Kelley's Blue Book in its portfolio.
But there is no doubt that the global used car market is ripe with opportunities. In Germany, for example, 7.3 million vehicles were resold last year, according to the Federal Statistical Office, with a value of €85 billion, only nominally below the sales of new cars.
A market share of 10 percent in Germany’s used car market would give Auto1 more sales revenue than well-known manufacturers such as Opel, Hyundai and Toyota. On a global basis, the market is potentially huge if it can become the first or second used-car platform.
“It is a big market, it is inefficient and it has high margins,” Mr. Misra said. “It is very attractive.”
Mr. Misra sees his main task as pushing the company to expand its horizons. When Auto1 co-founder Hakan Koç approached Softbank about an investment last year, Mr. Misra said he was reluctant to invest because the company has such low expectations. “You have to have a winner take all mentality,” Mr. Misra said.
Mr. Misra said he introduced Mr. Koç to Uber’s new CEO, Dara Khosrowshah, who was previously CEO of travel website Expedia, whom he believes can help guide Auto1 in its efforts to enter the US market.
Mr. Misra told Handelsblatt that in addition to its online presence, Auto1 has developed a sophisticated logistics network that can move vehicles from one region to another. So, for example, if a used VW Golf is pricier in Stockholm than in Madrid, Auto1 can buy the car in Spain and deliver it to a customer in Sweden for the higher price.
With its sophisticated software and logistics network, the company could expand to other product lines such as furniture or bicycles, becoming an eBay for large items that require expensive transportation.
“The company has the right management and technology,” he said. “We see a lot of options for Auto1 to work together with our other investments.”
Martin Murphy specializes in automobiles, steel and defense for Handelsblatt, Daniel Schäfer is editor of Handelsblatt's financial pages, and Charles Wallace is an editor for Handelsblatt Global in New York. To contact the authors: [email protected], [email protected] and [email protected].