Kavak Continues Expanding in Brazil

Through investments in Sao Paulo and Rio de Janeiro, Kavak has shifted gears to make Brazil its primary targeted market in the face of growing crises in the Mexican used-vehicle sales industry. The platform for used-car sales announced yesterday a US$103.92 million investment to expand to Rio de Janeiro in the coming months.

Since its foundation in 2016, first Mexican unicorn Kavak has experienced rapid growth that made it the second most valuable startup in Latin America. The company last year doubled its value during its Series E rounds due to investment coming from General Catalyst and SoftBank Group Corp, among others. Kavak arrived in Brazil’s financial center, Sao Paulo, in July 2021 through an investment of almost US$500 million that helped it build a strong presence across multiple cities.

With the newest investment, Kavak transitioned towards making Brazil its targeted main market by the end of 2022. Through a press release, the company stated its goals of offering more than 4,000 vehicles for purchase by the end of the year and to launch 11 new support facilities during the coming months.

The startup has also opened “Kavak City,” a space for vehicle reconditioning, in the industrial area of Barueri, Sao Paulo. Kavak City will guide visitors through the online selling and purchasing of used vehicles, positioning the startup as a big tech project more than simply an automotive one. As of yesterday, Kavak has also launched a website and application for Rio de Janeiro customers and opened an exposition room in Botafogo Praia Shopping.

These bold moves to expand in Brazil come as the Mexican automotive crises grow. In Mexico, sales in 2021 barely surpassed those of the catastrophic 2020 after the semiconductor shortage severely limited the industry’s long-awaited recovery. Although the second-hand vehicle market notably grew in 2021, industry insiders are worried about the impact President Andrés Manuel López Obrador’s legalization of illegally imported “chocolate” vehicles will have on this sector.

AMDA predicts 2022’s numbers will resemble those of 2021 with a slight possibility for growth. Although financing for the purchasing of new vehicles grew 4.5 percent during last year, it remains 22.7 percent below 2019. AMDA President Guillermo Rosales predicts at least five years before industry returns to pre-pandemic sales.

As such, Kavak is looking for success in Brazil, the largest market for vehicle sales in Latin America. Other startups might not be able to yet afford similar expansions, however, and will have to brace the storm that awaits them as the Mexican automotive market prepares for what might not be the smoothest year in sales and production.