KAVAK, Transforming the Used-Vehicle Market for Good

Q: What opportunity did Kavak find in the Mexican used-vehicle market?

A: We saw an opportunity for Kavak to participate in this segment to provide all necessary warranties to consumers to trade their used vehicles. We learned that given the informality levels of the market, there was no room for those transactions to be financed, which made it more difficult for a potential customer to sell or purchase a used vehicle. Globally, between 80 and 90 percent of used vehicles are financed. In Mexico, this figure drops to just 5 percent. There was a huge gap in the segment. Kavak has been in the market for four years and, during this time, we have become the country’s No. 1 platform for selling and purchasing used vehicles. More importantly, given the current circumstances, we are the only alternative that allows people to sell or purchase their vehicle without leaving their home. We guarantee that customers feel comfortable with the vehicle’s mechanical functionalities and any financing scheme they may need. Over 50 percent of our sales are financed. 

Our clients have seven days or 300km to test the vehicles. If they do not like it, they can return it, no questions asked. Another element that has helped Kavak to grow in the Mexican market is its philosophy. We prioritize our consumers, treating them as if they were our mothers. On the other hand, as a digital company in a country that has seen its digital gap decrease considerably over the last five years, we are capturing some of that growth.

Furthermore, in the COVID-19 scenario, we are the only alternative for such transactions. The world is changing considerably because of the pandemic. What we are seeing in countries that have passed the first stages of the pandemic, such as China and Germany, is that consumers are choosing private vehicles over public transportation. People are prioritizing social distancing, which will be reflected in the growth of private vehicles sales. However, the greatest growth will be experienced in the used-vehicle segment given the affordable prices it offers. If we add social distancing and the fact that people are also prioritizing savings given the harsh economic conditions, those are ideal conditions for a company such as Kavak to be successful.

Q: What impact has COVID-19 had on Kavak’s business model?

A: We analyze growth through different consumption channels. When the emergency started, we slowed our operations to protect our teams and our consumers by implementing all required health and safety protocols. We built a contactless experience. While we were preparing for this, we saw a deceleration in our numbers but since we set the plan into motion, we have seen daily growth between 5 to 10 percent. We expect that by the time we reach the final stages of the pandemic, we will see a remarkable performance. Most of the customers approaching Kavak now are those who have realized they need a private vehicle rather than other transportation options they were used to. 

Q: How does Kavak manage aftersales services?

A: When a customer buys a vehicle through Kavak, they should know our vehicles have passed an exhaustive 240-point inspection to guarantee the vehicle is in optimal condition. In addition, we recondition the vehicle in terms of aesthetics. Once polished, we take the vehicle to our potential customer’s home for a unique experience. Our customers have a three-month period to test for any malfunction. We have an application called Kavak 360, a digital support platform where the user can manage any malfunction, service, maintenance or any other process related to the vehicle. We also offer an extended-warranty period of a year, which includes maintenance services. This is one of the broadest offerings in the sector, from your home and just a click away. 

Q: How would you describe Kavak’s unique features?

A: We are the only online platform where you can find more than 2,000 vehicles in optimal conditions and within any price range. We have a verified stock with the best price-quality ratio in the market. Moreover, we are the only platform in Mexico with a unique seven-day or 300km return policy. To offer that, we conduct an excellent reconditioning and inspection of the vehicle. Moreover, despite the market’s informality, we can provide access to financing schemes through traditional banking institutions. We are obsessed with finding new alternatives for our customers under a full digital experience or through a personalized experience related to the vehicle. We work to reduce the unnecessary time our customers spend when looking for a new car. We are very passionate about our consumers. Buying a vehicle is one of the most important decisions for them and we want to guarantee an excellent experience. Our consumer-centered culture is our biggest differentiator.

Q: What is the regular consumer profile for Kavak’s products?

A: Our consumers range between 25 and 50-plus years old. Some of our consumers are driven to the platform by their children. Youngsters are great ambassadors for our platform, and they are often looking for their first car. It is an exciting family experience. When we deliver a vehicle, the entire customer’s family is there. It is an explosion of happiness. That is at the core of what we do. We create magical experiences for our customers.

Q: What have been the keys to surpass the two-year barrier local companies face when escalating their business? 

A: This is a huge market with significant problems that needed to be addressed with a business model that is now appreciated by our customers. When you are offering a product that consumers are actually looking for, it helps the business to thrive. Our team is also crucial in the process. We have done an outstanding job in building our team. Each of our employees could create their own company, but we are all together because we believe that together we can create something even greater, more fun and creative. We can level up our stakes thanks to the kindness, creativity, and culture of our associates. As entrepreneurs, everything is against you; the only formula to win is having a strong, well-prepared team. It is not about doing great things every day; it is about doing small tasks every day that add to great moments. 

Q: How are new mobility trends shaping Kavak’s business?

A: We are more advanced in understanding what the customer wants. All of our business initiatives are 100 percent focused on escalating all the elements we know our customers are looking for. We are aware there is room to improve the experience we offer. The wow factor we deliver to our clients along with their vehicles makes them want more from us after the sale is concluded. We are exploring aftersales experiences where every maintenance, financing scheme, or alternative model is easier for the client. We want them to have a trustworthy ally to solve all the annoying issues you have to deal with about your car. We are not following trends but creating them. What will keep us alive in the long-term is our ability to understand what our customers want even before they do. We are looking forward to building a vehicle-user community.

Q: What is your five-year vision for Kavak?

A: Kavak will be the unquestionable leader in Mexico in its segment. In five years, we will be operating in a few more countries across the region, with a market share similar to what we enjoy in Mexico. All consumers involved in purchasing, selling, or financing a vehicle will see Kavak as their first option given the benefits we will offer. Our headline will be: Kavak Building Latin America’s Best Team. In five years, we may go public as well. We have great ambitions.  

KAVAK is an online platform for purchasing and selling used vehicles in the Mexican market. The company has been in the market for four years and since 2019 it has been a leader in its segment due to its unique customer-centered approach