Clutch Aims to Serve 90% of Canadians by End of 2023

Clutch Aims to Dominate the Canadian Used Car Market

Clutch is striving to become the leading online platform for purchasing used vehicles in Canada. Established in 2016, the company recently secured $80 million (CAD $100 million) in a Series B funding round. These funds will be allocated to team expansion, logistical improvements, and inventory scaling as the company prepares for expansion into additional Canadian provinces.

Expansion Plans for 2023

“Our goal is to serve 90% of the Canadian population by the end of 2023,” stated Dan Park, CEO of Clutch, in an interview with TechCrunch. “This will necessitate launching operations in several key cities across Canada, including locations such as Montreal and Winnipeg.”

A Growing Market of Online Car Dealers

Clutch is part of a growing trend of online car dealerships emerging in recent years, each typically focusing on a specific geographic region. Notable examples include Carvana and Vroom in the U.S., Cazoo in the U.K., and Kavak in Mexico. Currently, Clutch operates in Alberta, British Columbia, Nova Scotia, New Brunswick, Ontario, and Prince Edward Island, with further expansion planned for the coming year.

By concentrating on the Canadian market, rather than pursuing international growth, Clutch intends to capitalize on a substantial multibillion-dollar opportunity, potentially outpacing competitors like Canada Drives.

Vehicle Sales and Reconditioning Process

According to Park, Clutch has already facilitated the sale of thousands of used vehicles and currently maintains a stock of approximately 1,250 vehicles. Vehicles are sourced from auctions, individual sellers, and fleet disposals.

Each vehicle undergoes a comprehensive 210-point reconditioning process, overseen by Clutch mechanics, to guarantee both safety and aesthetic appeal. The company aims to provide a seamless delivery experience, with vehicles arriving directly to customers on a flatbed, described by Park as “as magical as possible – simply click a button and have a car delivered to your driveway!”

Funding and Infrastructure Development

The recent financing round was spearheaded by D1 Capital Partners, with contributions from Flight Deck Capital, Canaan Partners, Upper90, Real Ventures, GFC, BrandProject, and FJ Labs. This investment will enable Clutch to grow its workforce from around 160 to over 250 employees in the next year.

Furthermore, the funding will support the development of the necessary infrastructure and logistics network to accommodate this expansion. Clutch utilizes a network of warehouses throughout Canada to store vehicles until they are ready for delivery, often within 24 hours.

Inventory Focus and Customer Choice

“A primary focus for the upcoming year is expanding our inventory and offering a diverse selection of vehicles,” Park explained. “Even if a customer is a loyal Clutch fan, they will likely seek alternatives if we don’t have the specific vehicle they desire, such as a blue Subaru Outback with 50,000 kilometers and manufactured after 2018.”

“Our aim is to cater to as many Canadian drivers as possible, and achieving this requires a broad and varied inventory.”

Fintech Services and Revenue Streams

E-commerce represents only a portion of Clutch’s revenue model. Approximately half of its income is generated through fintech offerings, including warranties, insurance, and financing options.

“We are dedicated to providing a streamlined and integrated experience,” Park stated. “Historically, there has been a lack of vertical integration in this area. By offering both a superior car-buying experience and comprehensive ownership solutions, including financial products that can assist consumers with credit building and overall vehicle ownership, we aim to differentiate ourselves.”

Improving Unit Economics Through Scale

As Clutch scales its operations, it anticipates improvements in unit economics. The most significant expenses involve vehicle acquisition and the logistics of the reconditioning process. Expanding across Canada will enable the company to achieve efficiencies in parts purchasing, delivery truck utilization, and other costs, which can then be distributed across a larger volume of units.

The Future of Electric Vehicles

While currently a small percentage of Clutch’s inventory consists of electric vehicles (EVs), Park anticipates this will change in the coming years.

“We believe our business model is particularly well-suited to EVs,” he said. “EVs generally require less reconditioning due to their simpler mechanical design – a gas-powered vehicle has around 2,000 moving parts, while an EV has approximately 200, resulting in reduced maintenance needs.”

Sustainability Initiatives

Unlike many traditional dealerships that rely on parts and service revenue, Clutch’s profit model differs. Park also noted that for every ICE vehicle sold, the company plants three trees in the delivery area. To date, Clutch has planted nearly 8,000 trees.