The online used car dealer wants to be in the black

Berlin Online used car dealer Auto1 has never turned a profit since its IPO in February 2021. Last year, the Berlin-based company posted an adjusted operating loss (Ebitda) of 107 million euros. This has dampened interest in buying the company’s shares: Today, just under eight euros are left of the issue price of 38 euros.

General price increases and the global economic crisis are currently having a significant impact on buying behavior: “Owners keep their vehicles for longer. Inflation has caused prices to rise massively,” says company boss and co-founder Christian Bertermann of the Handelsblatt with regard to challenges. If a vehicle does not find a buyer for a longer period of time, there is a risk of loss of value and depreciation. This in turn weighs on the balance sheet.

Nevertheless, Auto1 wants to regain the confidence of investors soon. By the final quarter of next year at the latest, the online used car dealer wants to break even based on the adjusted operating result. Just one year later, the income should exceed all expenses.

Not only Auto1, which is now the largest trading platform in the historically highly fragmented used car market, is suffering from the current economic situation. According to a recent study by the Institute for the Automotive Industry (Ifa), which specializes in car sales, only 3,900 of the current 6,800 car dealerships in Germany will remain by 2030.

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According to Bertermann, the company has now bought and sold several million vehicles. “This year we want to sell around 650,000 units and achieve sales of more than six and a half billion euros with our team of 6,000 employees,” he explains. Growth is weaker than originally expected.

High costs due to sale to private customers

Auto1 sells used cars to dealers and private customers via platforms such as wirkaufendeinauto.de. Contrary to original plans, the ten-year-old company now also runs workshops to prepare the vehicles, for example to check battery performance and paint cars.

Christian Bertermann

Auto1 CEO Christian Bertermann wants to regain investor confidence. The online used car dealer wants to make a profit by the final quarter of 2023 at the latest.

(Photo: Auto1)

Individual contract workshops would not have delivered the desired quality, says Bertermann. That’s why we started to be active ourselves. By 2024 at the latest, Auto1 wants to be able to process 210,000 vehicles a year for resale. The founder plans to make the workshops more professional and has taken Amazon as a model, whose warehouses are all structured according to the company’s own scheme.

Bertermann’s goal is to establish Auto1 as a 360-degree provider – one that covers everything to do with the used car market itself. To this end, Auto1 is testing an in-house financing solution in Germany and Austria in order to build up a portfolio for consumer loans. “We want to expand this step by step to other countries. We see great potential in the area of ​​financing,” he says. Auto1 relies on transparent trucks for the delivery of used cars.

These are prospects designed to turn stock market sentiment. Citi Bank analyst Catherine O’Neill says, “Investors are very wary right now about companies that are making losses and burning money.” That’s related to rising interest rates and consumer concerns. If Auto1 can show that it’s making progress towards profitability, the stock price is likely to improve.

British investor stands by Auto1

The latest figures do not yet reflect a trend reversal: In the third quarter, the adjusted operating loss widened to around 35 million euros – compared to 25 million euros in the same period last year. There are already experts who see other business models as having an advantage in the long term.

Robin Godenrath, partner at the investment company Picus Capital, which has invested in the car subscription provider Finn, says, for example: “Customers want to be less and less tied to assets and remain flexible.” Alternatives could be car subscription models in which vehicles are not bought, but to be rented.

>> Read also: Sales increased twentyfold in two years: what makes the car subscription start-up Finn grow so strongly

The wealth manager Baillie Gifford from Great Britain is firmly behind Auto1. He even used the weak share price to increase the stake. Baillie-Gifford manager Chris Davis says: “Operationally, things are going very well. So far they have achieved everything they set out to achieve.”

Competitors like Cazoo left Europe for cost reasons

The well-known Japanese technology investor Softbank, who gave the company a kind of accolade with its investment, is also backing Auto1. “They understand our strategy and stand behind it. They are still one of our major shareholders because they believe in our business model,” says Bertermann.

Auto1 should have the advantage that the competition is thinning out. In order to save costs, the British competitor Cazoo, for example, said goodbye to continental Europe in the summer. Stefan Bratzel, Director of the Center of Automotive Management (CAM), says: “It’s a market in which ‘The winner takes most or takes all’ applies.”

Bertermann sees “no limits to geographical expansion” for his company. Auto1 is already active in 30 countries. “But we’re taking everything step by step.” US market leader Carvana recently announced that it would lay off around 1,500 employees in order to reduce spending in view of the market environment.

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