Welcome to this episode of The Friday 5 with Steve Greenfield, Founder and CEO of Automotive Ventures, an auto technology advisory firm that helps entrepreneurs raise money and maximize the value of their companies.
We’re going to try to mix things up a little bit here on the Friday Five, and instead of reporting on the past week’s Auto Technology deals, I’m going to use our time together to report on some of the biggest news in the industry and the implications to the dealer body.
The “Agency” Model
First up this week, news out of Europe about the evolution of the dealer body away from franchisees and towards more of an “agency” model.
The agency model, which is being talked about more and more in the press but is not very well defined, is an evolution away from a more typical franchised dealership model to “agents” who sell products on the OEM’s behalf. This model is more attractive to the automakers because they see the potential to reduce operating costs and eliminate discounting.
As an OEM moves towards a direct-sales model, the dealers need less expensive facilities – to store fewer vehicles; consumers order the vehicle ahead of time so inventory costs are lower; advertising costs are lower, and there isn’t any competition on price as all vehicles sell at MSRP.
Outside of the U.S., Mercedes-Benz is also moving toward a more direct-sales – or “agency” – model, and is targeting 80% of European sales through this method by 2025.
This week, Mercedes-Benz announced plans to cut 15 to 20% of its dealerships in Germany, and about 10% of its dealerships globally, as part of a broad overhaul of its distribution network.
They were quick to add that there are no plans for a U.S. dealership consolidation at the present time.
At the same time, Mercedes is targeting 25% of all of its international sales to be online by 2025.
The automaker says the moves will cut distribution costs and allow it to rein in incentives as the automaker seeks to move even farther upmarket with higher average selling prices.
And it isn’t only Mercedes that is making big changes overseas.
Just last week, Stellantis said it would end all current sales and services contracts with European dealers for its 14 brands, effective June 2023.
The plan is to move the Stellantis distribution structure in Europe towards an “agency model,” where carmakers take more control of sales transactions and prices while dealers focus on handovers and servicing, no longer acting as the customer’s contractual partner.
The new Stellantis distribution structure would be operational in all of Europe’s 10 largest markets by 2026, and they envision allowing their dealerships to capture 5% front-end profit on new cars sold.
We will be keeping a watchful eye on how this dynamic unfolds over in Europe and its implications on the U.S. market.
Next up this week, we have a big deal in the auto refinance space that dealers should be keeping an eye on.
Caribou (formerly known as MotoRefi), the auto fintech whose mission is to help people take control of their car payments, has closed $115 million dollars in an oversubscribed Series C funding round, which brings the company’s valuation to $1.1 billion.
The round was led by Goldman Sachs Asset Management.
Auto lending is the fastest-growing consumer credit market in the U.S., with total auto debt having doubled to roughly $1.5 trillion in little more than 10 years. With the cost of car ownership soaring, Caribou is providing consumers with much-needed financial relief, saving its customers on average more than $100 a month on their auto loan through refinancing. The company is expanding its services across the auto financial landscape, recently launching its digital car insurance marketplace.
Founded in 2016, Caribou has rapidly grown its core auto refinancing offering by connecting car owners with lenders from credit unions, community banks and other trusted financial institutions. Caribou now also provides a quick and easy way to shop and compare car insurance from trusted national carriers in minutes with its new car insurance marketplace. By combining technology with expert lending and insurance teams, Caribou is prioritizing transparency and trust in the car ownership experience.
If Caribou is able to help the average consumer save $100 per month by refinancing their auto loan, and save further by renegotiating their vehicle insurance, there has to be an angle here for dealers to offer this kind of service to their customers.
Through Automotive Ventures, I’m going to be on the lookout for clever refinancing startups that include dealerships in the process as part of our new DealerFund.
If you’re an early-stage company working on refinance in a way that’s dealer-friendly, let me know. I’d like to talk to you.
Companies To Watch
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my monthly industry Intel Report, I showcase a few companies each month, and we take the opportunity here on the Friday Five to share some of those companies each week with you.
Today, we have two companies to watch: Addionics and Gouach.
Our first Company to watch this week is Addionics.
Addionics provides specialized improved rechargeable batteries by redesigning their architecture.
With a novel and patent-pending 3D metal fabrication method, they enhance performance, mileage, safety, cost, and charging time of batteries.
There are two sides to the company – hardware making smart 3D electrodes, and software – where Ai will optimize given battery structure to optimize performance attributes.
Check out Addionics at www.addionics.com.
Gouach invented and produces renewable lithium-ion batteries.
Their batteries are designed to last thanks to their patented system of cell replacement.
Since lithium-ion cells are now expendable, their Battery Management System is connected and guaranteed 10 years.
This way they reduce by 80% the environmental impact of lithium batteries.
Check out Gouach at www.gouach.com.
So that’s your weekly Friday 5, a quick wrap-up of the big deals in the automotive technology space over the past week.
If you’re an early-stage automotive technology entrepreneur looking to raise money, or an entrepreneur who is trying to decide whether and when they should raise money or sell their business, I’d love to speak with you.
Thank you for tuning into CBT News for this week’s Friday Five, and we’ll see you next week!
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