UK Car Retailer Cazoo Ditches EU Market to Ease Path to Profitability

Following last month’s announcement that it is pulling out of the mainland European market to focus its attentions on the United Kingdom, British online auto marketplace Cazoo announced Thursday (Oct. 27) that the withdrawal is expected to be complete by the end of the year.

In a third-quarter earnings (Q3) statement, the firm announced that it has completed its strategic review of its EU operations, and the withdrawal is expected to generate net savings of over 100 million pounds (about $116 million) for the retailer by the end of 2023.

As Cazoo Founder and CEO Alex Chesterman explained to shareholders, the decision to focus on the U.K. market is part of a plan to achieve profitability without the need to raise any additional funding.

“We continued to see a strong upward trajectory in our U.K. retail [gross profit per unit (GPU)] of 488 pounds during the quarter, which was up by [58%] compared to the prior quarter,” he stated, adding “we remain laser-focused on further improving our unit economics as we drive towards profitability, whilst remaining one of the fastest growing used car retailers in the U.K.”

Cazoo’s strong Q3 growth comes off the back of a 145% year-on-year increase in revenues in the second quarter of the year driven by higher U.K. sales, better margins and improved operational efficiency.

The move to retreat from the EU comes only months after the company announced its foray into the Spanish and Italian markets in May and June, respectively. It represents a strategic pivot that has seen Cazoo shares level off after a near continuous decline since the company listed on the New York Stock Exchange in August last year.

UK Opportunity

While the mainland Europe opportunity is huge and could have been a major driver of growth, Cazoo has been under pressure to break even after years of burning through cash, leading to the decision to double down on the firm’s more established U.K. business.

According to Chesterman, Cazoo has sold almost 100,000 vehicles online in the three years since the platform launched, and the firm now has ambitions to capture a 5% or greater share of the U.K. used car market.

In addition to the announcement on the EU exit schedule, other key aspects driving the path to profitability were discussed on the Q3 earnings call, including a renewed focus on efficiency in its domestic market.

For example, to achieve better margins on each car sold, the company has scaled its reconditioning capacity and focused on sourcing vehicles directly from consumers.

And with owners able to get an online quote instantly and receive payment within two hours of handing their car over, this resulted in 40% of all Q3 vehicle purchases being sourced this way.

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