A decade after its launch into the UK car retail sector, carwow co-founder and chief executive James Hind has reflected on the road that led to an "exciting new growth phase".
For AM's June instalment of its '10 minutes with...' Q&A feature series, Hind revealed how carwow has become a go-to destination for car buyers, a trusted partner for retailers and a vital marketing tool for OEMs, both in the UK and overseas.
Carwow launched in a very different guise to that we see today. How do you view that evolution and the sometimes frosty reception you received in the early days?
We were thought of as a last resort to sell a few extra cars. The way we came at the market was the way that the market needed us at the time. That was the way the world was, that was the way our model operated. I think through us changing the way we work with dealers and due to the changes in the market, it’s just shifted. There’s no supply, there’s no discounts on virtually anything and we’re bigger than ever thanks to the long-term relationships that we’ve got with car manufacturers and dealers. I think most car dealers in the UK would think of us as a new car place now, but – after the acquisition of Wizzle and birth of Sell Your Car – huge parts of the business are helping consumers sell their used cars, helping dealers buy cars. We’re extremely large in Germany – almost bigger now than we are in the UK – and in Spain and, to be honest, a lot of this stuff wouldn’t have happened if the market had stayed as it was five years ago. So, like every everyone in the industry, we have been through Brexit, WLTP, COVID, chip crisis, Ukraine crisis, there’s been no supply for a long, long time now and that’s forced us to look at how we operate. It has also made the business far more successful. The market collapsed last year, but our revenues grew 60% year-on-year.
You changed the charging model some time ago. Where does the revenue come from now?
We charge dealers upon an inquiry that we provide, and we still handle the enquiries or in software-only management tools. Also, car manufacturers are buying those leads or subsidising the cost to dealers as well as paying for marketing. The changes have helped ensure that the discount levels are far more manageable. In the past everyone was on cost per sale, so you’d have a dealer somewhere in the country who would go big on price to try to shift some cars. That would set a kind of price floor for the whole market. That doesn’t happen anymore. Now everyone makes very good margins on the cars, and we’re seen as just a marketing channel. We’re not like other players, though. There’s no big subscription you’ve got to sign up to. There’s no annual contract. We live and die by our performance and dealers can turn us off instantly.
Is further international expansion on the cards for carwow?
Not for at least another 12 months, but we are starting to think about what comes next. The biggest focus is on Sell Your Car. It’s big in the UK, but we’re launching in Germany as well, and Spain imminently. Then, also, we’re pushing now into used cars, so we’re inviting all our current partners and new partners to list their used cars with us. Largely because of the chip crisis, you have a lot of customers who are considering new cars on carwow, but the killer is the wait time. What we’re showing is you can wait or here’s a very similar one that’s one or two years old, which you can have today.
What sort of volumes are you achieving with Sell Your Car?
We’re getting about 20,000 people a month listing their car. We’ve implemented very strict qualifying processes, so everyone must provide a bunch of photos and be ready to sell their car immediately. Part of the challenge is that lots of people are waiting for a new car so they can’t sell yet. Right now, our focus is on signing up more dealers and making them aware because dealers think of carwow and they don’t think we’re relevant to their car buyers or to independent dealers but now we are – that’s exactly who we’re talking to. Facilitating direct online car sales – particularly with carwow investors Mercedes and Volvo – looks to be a huge strength.
Was the agency model shift something you anticipated?
No, but it’s obvious that’s the way everything is now going and both Mercedes and Volvo are, I’d say, ahead of most. We see (the shift to an agency model) as a very positive shift for customers, for car manufacturers and for dealers. It’s also good for carwow. If you want to book a nice hotel, if you want to buy a new iPad, if you want to fly to somewhere, you can book or buy direct from the hotel, the Apple shop, from the BA website. But you’ll find all of these places on third party sites at the same price, largely. That’s how we see the future. Whether customers are looking at used, not sure whether they should lease, if they’re selling their car, they’re going to be on carwow. Therefore, it goes back to marketing, we give all these all these manufacturers another way to reach consumers.
So, in that scenario carwow is, essentially, the ultimate online multi-brand new car dealership?
The online version, yes. But we will still always connect you with your offline choice as well. They’re still showing as your local showroom because a lot of people still want to go and see the car. That physical offline connection is still really important and I think one thing that some car manufacturers are quite naïve to, and to a lesser extent dealers, is you still need humans to be able to speak to.
We keep hearing that new breakthrough brands are on their way to the UK. Are you working with them?
We’re doing a lot with Vinfast, a big Vietnamese car manufacturer launching with a full electric line-up of proper cars. We’re also doing a lot with the Geely brands, including Polestar, but, again, what we’re teaching them is still there’s still a big role for showrooms. There’s still a big role for dealers or customer experience people. So don’t just think online only, it’s got to be a blend of both.
What influence has the growth of online car retailers had on carwow?
We’ll work with any form of car retailer. I think, overall, they’re a good thing for the industry, particularly in pushing the more traditional dealers into digital faster. COVID has done that as well, of course. I’ve been hugely impressed with how franchised independent dealers have made that jump in two years. Almost all their websites now have fantastic inventory, fantastic e-commerce solutions.
What’s the leadership structure at carwow now?
It’s like most grown-up companies. We started out with about 40 employees, many of them part-time, and we now have around 400. We have a dozen on the board and we’ve been careful to bring in people who’ve helped scale big tech businesses, the likes of Expedia, the Farfetch shipping online marketplace, Trainline. They help because I haven’t been through this journey myself, I haven’t seen it. We also have someone from Mercedes on the board and we’re about to have someone from Volvo. They give us is insight into how a car manufacturer thinks and operates at a global level, how they’re thinking about things like agency and direct selling. That’s useful for us to know.
The automotive sector has seen businesses both go public and return to private ownership recently. Is this something we will see from carwow?
I think we might consider going public at some point. We see it only as just a way to raise more capital. We’ve raised quite a lot of money privately at the moment from venture capital firms, private equity firms, car manufacturers. It’s not a great time to go public at the moment, broadly speaking, though.
How big and how important is that carwow YouTube channel now?
It’s the world’s largest for cars. We had a billion views last year alone, so we’re big on the video side. We’re also very large on the written side. It’s not as sexy, but it attracts a huge amounts of visits. I think what it allows us to do is build a relationship and add value to the consumer very early on. They didn’t know what car to buy so they’re using carwow. We’re educating and, hopefully, entertaining at the same time so they feel the connection to the brand.
What’s your outlook for UK car retail sector in the remainder of 2022?
Our view is this supply crisis will continue at least 18 months and, as a result, the big focus from us will be on used cars and helping consumers sell their cars. I can see Sell Your Car overtaking new car in terms of volume and revenue in a very short period, mainly because the market is so much bigger. Also, I’m always learning about the industry. I didn’t realise just how interested car manufacturers are in the repatriation of their used cars, their efforts to keep them within the dealer network, so we’re starting to speak with a lot of car manufacturers about helping them with that.