CEO Michael Bor of CarLotz — a used-car platform he co-founded and expects to take public this week via a SPAC — says selling used vehicles isn’t all that different from his old job as a mergers-and-acquisitions investment banker. In both cases, someone would approach him to sell an asset, he’d find a buyer and he’d charge a fee for his efforts.
“At CarLotz, we’re essentially a sell-side mergers-and-acquisitions firm for cars instead of companies,” Bor, a Harvard Business School MBA who co-founded CarLotz in 2011, told PYMNTS in a recent interview. “Obviously, the fees are smaller, but we get to do a lot more deals than any mergers-and-acquisitions firm.”
Richmond, Va.-based CarLotz is an omnichannel platform for used cars that sells vehicles both online and via a growing network of U.S. “hubs” where customers can come in in person.
“We have the capabilities to enable the buyer to fully transact with us online if they choose,” Bor said. “We also have the ability for the buyer to step off of the online journey and either talk with one of our people over the phone [or] by email.
“Sometimes they want the video of a vehicle sent to them so they can share it with their friends and family,” he said. “Sometimes they want to come in and test drive the vehicle and kick the tires. We are totally agnostic to how they want to shop.”
A Consignment Shop For Cars
Unlike traditional used-car dealers or many of its online rivals, CarLotz doesn’t actually own the vehicles it sells.
Instead, the company markets cars on a “consignment” basis — polishing them up, advertising them on sites like Cars.com, showing vehicles to buyers online or in person and handling the paperwork. Sellers continue to own the cars until vehicles sell, paying CarLotz a $299 upfront charge and $799 “success fee” when deals close.
Bor said that business model works better for both buyers and sellers. “The traditional dealership model is to buy low and sell high,” he said. “Our model is to sell the vehicle for a fair and reasonable price, take a reasonable fee and pay the seller the remainder.”
He said CarLotz typically nets sellers several thousand dollars more than what they’d get selling vehicles themselves or doing trade-ins at traditional dealerships.
And for buyers, the fact that CarLotz avoids the overhead of owning vehicles — and pays workers salaries instead of commissions — means cars generally sell for lower prices.
It All Started With A Drive Home
The idea for CarLotz came to Bor when he’d commute to and from his M&A job and often see cars parked on a busy street with “For Sale” signs in their windows.
“It always occurred to me that that’s such an inefficient way to sell a car,” Bor said, adding that he would think: “Why can’t there be a much more professional way to get that done?”
It turns out there was, and Bor and his partners launched CarLotz with a single Richmond hub a decade ago. A second Virginia site soon followed, then CarLotz made a major expansion into reselling cars for large corporate clients like rental-car companies.
Today, those fleet sales and a small number of cars that CarLotz resells from trade-ins make up 85 percent of the business, with consumer sales accounting for the remaining 15 percent.
Wall Street likes what it sees, in part because of initial successes for recent go-public deals from rivals Shift Technologies and Vroom. Rival platform Carvana’s shares have also skyrocketed some 880 percent over the past 10 months.
CarLotz reached a deal in October to go public via a merger with Acamar Partners, a special purpose acquisition company (SPAC). Including a related $125 million private investment from the group that includes former General Motors CEO Rick Wagoner, CarLotz will net about $320 million from the transaction on an $827 million valuation.
CarLotz’s investors have already approved the deal, and if Acamar’s shareholders agree as well this week, the company will start trading on the Nasdaq on Friday (Jan. 22).
Revving Up Growth
Bor said CarLotz will use some proceeds from the deal to build new brick-and-mortar hubs around the country.
The company currently has eight hubs in five states, and plans to next month open new hubs in Seattle and Orlando, Fla. CarLotz then expects to add three to four additional sites per quarter going forward.
The company projects 2020 revenues to total about $113.5 million when final numbers come in, with sales rising to $365 million in 2021. A recent securities filing shows that the 160-person company lost $2.2 million during 2020’s first nine months, but Bor expects CarLotz to turn a profit in 2022.
A $1 Trillion Market
Bor sees big growth opportunities in a used-car industry that has a nearly $1 trillion total addressable market, but a terrible reputation among consumers. He added that the business is currently so fragmented that the top 100 dealers collectively hold just 6 percent market share.
“Put all that together and it leads to a tremendous opportunity for someone who really wants to provide a different level of service,” Bor said. “And that’s what we’ve done.”