Kavak Receives US$810 Million Investment

Mexican unicorn Kavak recently obtained a new investment from HSBC, Goldman Sachs and Santander for a total of US$810 million that will be used to finance the purchase of pre-owned cars and support the company’s transactions. This makes the business the most valuable private startup in Latin America. 

“As a result of these agreements, we will be able to strengthen our certified car offer in the market and also invest in the operating model that in less than two years has allowed us to offer financing solutions to over 50 percent of our customers,” said Moisés Flores Botello, CFO, Kavak. 

HSBC invested US$675 million in Kavak through a sale agreement in which the unicorn will provide the financing rights for vehicle acquisition to HSBC. Goldman Sachs and Santander financed inventory and development growth, with US$100 million and US$35 million, respectively. 

Flores highlighted the importance of creating a secure system for the sale and purchase of second-hand vehicles in the region “In Latin America, 40 percent of pre-owned car transactions have some type of irregularity, increasing the risk of fraud. Under these conditions, it is difficult for institutions to take the risk of financing the units; in Mexico alone, less than 5 percent of sales are financed, which prevents citizens from increasing their purchasing power by not having access to a car,” Flores told Forbes México. 

The pre-owned vehicle market in Mexico is valued at US$60 billion, reports Kavak, which aims to reach 1 percent participation in 2022. At the moment, Kavak operates in Brazil, Chile, Colombia, Argentina, Peru and Turkey. 

Kavak’s business model aims to eliminate obstacles for those entering the second-hand financing market. “Our credit extension supports the growth opportunity for the enterprise and fintech sectors in Latin America in general,” as Samuel Villegas, CEO and President, Goldman Sachs Mexico.

The Mexican unicorn seeks to amplify mobility options in the region. “In countries such as the US, seven out of every 10 citizens own a car, which contrasts with Latin America where only 1.5 out of every 10 inhabitants have been able to buy a car. This is the reality that we want to transform, and we will not rest until we become a true agent of change that solves the mobility problems of our citizens,” Flores.