The Kavak platform is funded in pesos to support its auto sales business in the country

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After a Stormy year for startup fundings like everywhere in the world, the Mexican unicorn Kavak has found a new way to finance his activities in the country. The platform for buying and selling used cars signed by a trust with three Argentine banks to continue its expansion in Argentina. Its executives in the country do not believe inflation and the threat of a decline in activity will affect their plans in 2023.

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This is a new bet: together, the banks BACS (Banco Argentino de Crédito y Securitización), Supervielle and Hipotecario they constituted a trust for $1,200 million so that the company can expand its automotive workforce in the country.

In dialogue with Clarin, Mariano Segarra, general manager of Kavak in Argentina, explained: “We have worked with many banks here in Argentina: both for simpler things, such as paying the salaries of collaborators or financing the cars we sell. We went with these banks thinking about how we can work at a time when funding startups is no longer simple and find a new and more disruptive figure”.

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Segarra highlighted that, until now, There was no figure of the fund for the financing of the purchase of cars at the local levelly announced that in a second tranche it is planned to either increase the amount of this trust in pesos or increase the number of banks participating in this operation. “This is just the first step. We have found other banks that are interested in being able to join,” she said.

“We bought the cars in our own name and once we are on the car register we pass them on to the trust, which gives us the irrevocable power to drive those cars, i.e. to subsequently transfer them to our customers. In the meantime, the value of the vehicles fuels confidence and is the guarantee that we will pay the interest on these loans”, he said regarding the functioning of this trust.

Asked about the factors that led to this decision in a context of high inflation, exchange rate tensions and given the uncertainty that an election year brings, Segarra said: “It is important for us to be able to Strengthen relationships with local banks and with the currency used in the country. Regardless of the fact that we have inflation of 6% per month and annualized inflation of 98.8%, we choose to operate this way.”

Despite the questions posed by the local economic scenario, Segarra said Argentina continues to be an important market for his company. “In Argentina, 0km cars are 40% financed and half of that percentage is pawnshop loans and the other half is savings plans. LUsed cars in Argentina are only financed at 5% and 6%. We’re getting to finance 20% of used cars,” he said.

At a pivotal time for startup funding, where a majority has seen private venture funding have declined significantly over the past twelve months and become “more selective,” Kavak’s chief executive said the importance of collaborating with local banks.

“We he has given us support that goes beyond the economy and which indicates the business model we have and that the banks have seen the model and in growth that we have something sustainable over time and that we are really working to change the model for buying and selling used cars. And that is very important to us,” she said.

Regarding the outlook for his business this year, where macro variables are starting to look a little bleaker than in previous years, Segarra noted: “The second-hand market has moved a lot and we too started off with a good January“.

“We see the market in the context of Argentina, that this context is always present. 90% of used car sales are made between private customers. The market we target is that, thinking about how we can make life easier for those people who make transfers between individuals, which is a cumbersome, very nervous, uncertain process,” he said.

Source: Clarin

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