Cazoo car sales double amid rising demand but shrinking margins

Cazoo car sales DOUBLE but margins shrink as demand for used vehicles continues to outstrip supply

  • The number of cars sold jumped nearly 10,000 to 19,713 in the first three months
  • Gross profit per car sold fell 19% to £124; Group gross margin halved
  • It said its inventory hit a record high of around 6,500 vehicles at the end of March.

Online car dealership Cazoo doubled the number of cars sold in the first quarter as it successfully sourced and refurbished more vehicles to meet growing demand.

The company, which buys used cars and refurbishes them using its refurbishment centers and then sells them online through its website, said it sold nearly 10,000 more vehicles than last year, or a total of 19,713.

This helped boost revenue by 159% to £295m, from £114m a year ago.

However, gross profit per car sold (GPU) in the UK fell 19% to £124 as limited supply continued to be outpaced by demand, with overall gross profit halving to £2m sterling.

In demand: Cazoo saw revenue jump 159% to £295m in Q1

Demand for used cars has increased so much that Cazoo last year was unable to refurbish used cars quickly enough to sell them.

The company, which counts Daily Mail and This is Money owner DMGT among its investors, said its inventory hit a record high of around 6,500 vehicles at the end of March.

And it expects a “significant improvement” in gross profit per car in the second quarter, with the company’s target for GPU to be £900 by the end of the year.

Founder and chief executive Alex Chesterman, the entrepreneur behind Zoopla and Lovefilm, said the surge in sales comes despite a “rapidly changing macroeconomic backdrop”.

“While we are keenly aware of the broader macroeconomic uncertainties, we remain focused on executing our strategy as we continue to progress against our previously detailed expectations for the year.

“We expect any macro headwinds to be transitory in nature and remain extremely excited about the huge market opportunity for Cazoo and are very confident in achieving our long-term growth and margin targets.”

Despite assurances, Cazoo shares fell 6.3% to $1.50 shortly after opening in New York.

The company said it continues to invest in expanding its operations in France and Germany and is preparing for launches in Spain and Italy this summer.

It also continued to raise funds for further growth, issuing $630 million in convertible notes to an investor group led by Viking Global Investors.

And it secured €50 million in asset-backed financing for its subscription business in France and Germany.

Heavy investments mean Cazoo has yet to turn a profit – last year’s pre-tax losses widened to £549m, from £100m in 2020. It is expected to become profitable next year.