Frontier Car Group Restructures, Shifting Focus to Latin America and Asia

A significant capital infusion is currently being secured by Cazoo through a partnership with a U.S.-based SPAC, resulting in a $7 billion valuation. Simultaneously, a notable development is occurring within the used-car sector, involving consolidation of operations.

Frontier Car Group, a Berlin-based company specializing in the development of used-car marketplaces targeted at emerging markets, is ceasing its operations within the city of Berlin. This strategic shift will involve the relocation of 100 positions from Berlin to India, as confirmed by the company.

OLX Group's Strategic Realignment

The majority stakeholder, OLX Group – a division of Prosus – has articulated a desire to concentrate on more localized operations in Latin America and Asia. These operations will be integrated under the OLX Autos brand, absorbing the remaining functions of FCG.

Gautam Thakar, the CEO of OLX Autos, appointed in February, is strategically positioned in Gurgaon, India, to oversee this realignment.

Current Operational Footprint

Currently, the company maintains a presence in several key markets, including Argentina, Chile, Colombia, Ecuador, India, Indonesia, Mexico, and Peru.

Furthermore, OLX Autos independently manages three additional brands: CarFirst in Pakistan, Cars45 in Nigeria, and webuyanycar.com in the United States.

Investment and Acquisition History

In late 2019, OLX acquired a controlling interest in Frontier Car Group through an investment of approximately $400 million, which valued Frontier at around $700 million at that time.

The details of this move were initially observed on Twitter and subsequently confirmed by a Prosus spokesperson to TechCrunch.

Impact of the Restructuring

Approximately 100 employees based in Berlin are directly affected by this restructuring, with their roles being transferred to India. No other European markets were actively operating under FCG.

Visitors to FCG’s website are now automatically redirected to the OLX platform.

Origins and Inspiration

Despite being founded and headquartered in Berlin, Frontier Car Group consistently focused on emerging markets, aiming to replicate the used-car marketplace model in these regions.

The founders of Frontier were inspired by Auto1, another Berlin-based used-car marketplace that successfully went public in Germany in February and is currently valued at $12.6 billion – a potentially encouraging benchmark for Cazoo investors.

Founding Vision and Subsequent Developments

“I fell in love with the Auto1 model,” stated Sujay Tyle in a 2018 interview with TechCrunch. “I could foresee its applicability to emerging markets, which represent a significant opportunity for growth.”

Sujay Tyle, a co-founder of Frontier, departed the company in August 2020 and is now based in Mexico City, where he is developing a new e-commerce investor called Merama.

Frontier’s success contributed to the burgeoning tech startup scene in Berlin, bolstered by substantial investment from firms like Sequoia and SoftBank.

Synergy with Naspers’ Strategy

This focus on emerging markets aligned with Naspers’ global expansion strategy, leading to OLX becoming a strategic investor in Frontier, initially with a smaller stake and eventually acquiring majority ownership and control.

Reasons for the Shift

The rationale behind OLX’s decision to discontinue the Frontier brand and consolidate operations under OLX Autos remains unclear. However, OLX has been undergoing restructuring in various markets, including layoffs of 250 employees in India following the closure of marketplaces focused on real estate and used goods.

Economic Context and Recovery

While some companies, like Cazoo, have experienced a surge in business following the Covid-19 pandemic, the crisis has disproportionately impacted numerous economies, sectors, and individual companies, leading to cost-cutting measures. Globally, significant declines in new car sales have been observed.

A Prosus spokesperson indicated that both OLX and OLX Autos were initially affected by Covid-19 but have since demonstrated recovery. Prosus has maintained profitability despite a turbulent year, although profits have reportedly decreased. Updated financial reports are expected in June.

It is important to note that OLX is integrating FCG’s remaining operations into its OLX Autos business, rather than a complete shutdown of all operations.