In a strategic move, OLX Group has invested US$400 million in Cars45 to increase its reach in emerging markets.
OLX is backed by South AfricaN media group, Naspers, while Cars45 is a subsidiary of Frontier Cars Group (FCG).
Cars45 is an online car marketplace where anyone can sell, swap or buy a used car. OLX is equally an online marketplace where users can trade used cars as well on the platform.
The OLX-Cars45 investment
OLX is still very much in the business of trading cars, but has now chosen to adopt a different business strategy.
The decision to invest $400 million in Cars45 can be considered a recognition of the potential of Cars45, and a move that turns the competition’s strength into the strength of the team. Everybody wins.
Cars45 operated only in Kenya and Nigeria until this deal. According to Martin Scheepbouwer, CEO of OLX Group, as a result of the joint venture, Cars45 will be taking on the global online car marketplace.
Together with FCG, we are aiming to build the leading global used car marketplace, offering a premium and convenient service to millions of car buyers, sellers and dealers. We’re in a unique position to accelerate the expansion of this platform worldwide.
Our experience in India is a great proof of concept, where within the space of a year, our joint venture has already increased the number of stores threefold, with car purchase volumes continuing to grow by 10% month-on-month.” – Martin Scheepbouwer, CEO of OLX Group
For Cars45, this deal effectively puts it in the top 5 car marketplaces worldwide, while also making it the leading marketplace in different parts of Africa where OLX pulled out to give space to Cars45.
The investment makes OLX the largest shareholder in Cars45. Frontier Cars Group, which owns Cars45, is now currently valued at $700 million.
OLX’s investment comprises the traditional capital supply into FCG and an acquisition of shares held by other investors, management and key people. The joint venture shares owned by OLX in India and Poland also form a part of the investment by OLX in Cars45.
What users of Cars45 gain from the venture
Some services which were not available to users of Cars45 before will now be made available to them.
Users can now trade on the platform with the assurance that the car will get to a prospective customer through the provision of the ‘guaranteed buy’ service.
Other services such as warranties, insurance and inspection financing are now also available to Cars45 patronisers.
OLX’s move to be a part of the top car marketplace globally, through its deal with FCG, holds the potential to make car trading easier and more efficient with the combination of the two online forces.