Onto Raises $175M Series B to Expand EV Subscription in the UK

Onto Secures $175 Million to Fuel EV Subscription Expansion

Onto, a U.K.-based electric vehicle (EV) subscription service, has successfully raised $175 million in a Series B funding round, combining equity and debt. The company intends to utilize these funds to broaden its reach within the United Kingdom and to initiate operations in new markets.

Funding Details and Fleet Growth

This recent investment brings Onto’s total funding to $245 million. Swedish venture capital firm Alfvén & Didrikson spearheaded the equity portion of the round, while British investment company Pollen Street Capital provided a senior-secured, asset-backed debt facility.

Onto anticipates doubling its vehicle fleet size every three to six months, with all newly acquired vehicles serving as collateral. The precise allocation between equity and debt within the round was not disclosed by the company.

The Rise of Car Subscription Services and EV Adoption

The company is capitalizing on the increasing popularity of subscription models alongside the growing adoption of EVs, which is being propelled by legislative changes. The U.K., mirroring many other nations, is set to prohibit the sale of new internal combustion engine vehicles by 2030, prompting a greater interest in electric alternatives.

The transition from gasoline to electric vehicles is gaining momentum. According to the Society of Motor Manufacturers and Traders, plug-in hybrid and all-electric vehicles accounted for 10.7% of new car registrations in the U.K. in 2020.

This represents a significant increase from the 6.6% market share recorded in 2019. Collectively, battery and plug-in hybrid electric vehicles comprised over one in ten registrations, a substantial jump from approximately one in thirty in 2019.

Challenging Traditional Car Ownership

Traditionally, purchasing a car is often viewed as a poor investment due to depreciation and associated costs. Despite this, the U.K. continues to see millions of new car sales annually. Onto’s founder and CEO, Rob Jolly, believes there is substantial opportunity to establish a sustainable and profitable subscription-based business within this large market.

“Our total cost of ownership is very similar to owning a car, but subscribers don’t have to worry about charging or servicing expenses,” Jolly explained to TechCrunch. “The approximate monthly cost is £330 (~$450). There’s no initial deposit required, which is a major benefit. We aim to eliminate all obstacles and demonstrate that a car subscription is both easier and more affordable than owning a gasoline or diesel vehicle.”

Onto’s Vehicle Pricing Tiers

A review of Onto’s website reveals that the £330 price point applies to specific vehicles at the lower end of their 3,000-vehicle fleet. Mid-range options, such as a Peugeot, are priced at £450 (~$622) or a Hyundai at £560 (~$775). Higher-end models, including Jaguars and Teslas, can cost up to £1299 (~$1,800) per month.

Cost Comparison: Subscription vs. Leasing

Considering a Hyundai Kona lease, the pricing can be comparable depending on the lease duration, which influences the monthly rate. Longer leases generally have lower monthly payments. Assuming a three-year lease at £384 per month, the annual cost would be approximately £13,824, with a down payment of £3,456.

Adding an average annual insurance cost of £2,264 and charging expenses of around £520 (based on 35 miles of daily driving and the Kona’s 245-mile range), the total cost over three years reaches approximately £20,538 (~$28,304). Onto’s service at £560 per month would total £20,160 (~$27,783) over the same period. With the U.K.’s plug-in car grant, the purchase price could be reduced to £27,950 (~$38,620).

Competitive Landscape

Onto’s pricing is competitive with other EV subscription services, such as Steer in North America. Flux, based in San Francisco, offers Teslas at a lower monthly rate of $600, but does not include the comprehensive services like road tax and insurance offered by Onto. Notably, EV owners in the U.K. are exempt from road tax.

Included Services and Partnerships

An Onto subscription includes home delivery and access to free charging through partner networks like BP Pulse, Tesla Supercharger, InstaVolt, and Shell Recharge. The company collaborates with 10 car brands, offering 12 different EV models, and is actively pursuing additional partnerships with automakers.

While Jolly did not disclose specifics about future partnerships, updates to the company’s website suggest that Volkswagen and its 2021 e-Up! model will be the latest addition.

Profitability and Future Outlook

Jolly anticipates that it may take time for widespread adoption of both EVs and subscriptions, but he is confident that the convenience and flexibility of a white-glove service with anytime cancellation will appeal to customers. He also indicated that Onto is nearing profitability.

Investor Confidence and Expansion Plans

Onto’s lead investor, Alfvén & Didrikson (A&D), known for its long-term investment strategy, has expressed confidence in the company’s potential. Tiyam Afshari, partner at A&D, highlighted the transformative nature of the subscription model for car ownership.

“Subscription as a form of ownership when it comes to cars is a natural progression given the hassles of traditional car ownership,” Afshari stated to TechCrunch. “We strongly believe the subscription model will become a significant part of the automotive financing industry, and Onto is well-positioned to capitalize on this trend.”

Given A&D’s long-term commitment, Sweden is a potential market for Onto’s expansion, as Scandinavian countries have demonstrated a faster adoption rate of EVs. Norway’s imove, another EV subscription service, recently secured $19 million in a Series A funding round.

Flexibility and Access to Latest Models

For many users, the appeal of an EV subscription extends beyond avoiding costs like road tax and insurance; it’s about the ability to stay current with the latest EV technology.

“Just like iPhones receive annual updates with improved technology and battery life, the same is happening with EVs,” said Jolly. “This is becoming the new norm for car ownership, particularly among millennials, who can easily upgrade to the latest models with even minor improvements like increased range.”

Customer Perspective

Simon Smith, 32, from East Devon, joined Onto in 2019 for both ethical and financial reasons and has been satisfied with the Renault Zoe ZE40 models he has used.

“It’s the most affordable way for me to drive electric,” Smith told TechCrunch. “Going electric wasn’t straightforward in 2019, and it remains relatively limited in the U.K. You’d likely need to save a significant amount of money, even for a used car, and you wouldn’t have the same flexibility.”

Smith also believes that Onto provides a valuable “try before you buy” option, which is likely a key factor in attracting partnerships from automakers like Tesla, Hyundai, Jaguar, Audi, and Peugeot.

“We can work alongside car manufacturers and dealerships as one of many ways people can now acquire a vehicle,” Jolly concluded.

Additional investors in the equity round included Legal and General, Campden Hill Capital, and JamJar, alongside new investments from TotalEnergies Ventures, Vlerick Group, Dutch insurer Achmea Innovation Fund, and the family office of Jim O’Neill. Lazard served as financial advisor to Onto.

This article was updated to reflect new information regarding car leases in the U.K.