Mexico's pre-owned car platform Kavak plans to invest $130 million over the next two years in the GCC to build the largest used-car operation in the Gulf after merging with regional player Carzaty.
The Latin American used-car dealership, which has a presence in 10 countries including Mexico, Brazil, Argentina and Turkey, will initially launch operations in the UAE and Oman as the first step of its expansion plans in the GCC, followed by Saudi Arabia, the company said in a statement on Wednesday.
Kavak’s used-car operation in the Gulf region will employ more than 1,000 people and feature the largest vehicle reconditioning centres in the GCC, it said.
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“The GCC region represents a massive untapped opportunity for Kavak,” said Carlos Ottati, global chief executive of Kavak.
The UAE’s used-car market experienced unprecedented growth in 2021, and is expected to grow at a compound annual rate of 8.3 per cent from 2021 to 2025, according to a report by data platform Research and Markets.
More than one million used cars are expected to be sold in the country by 2025, the report said.
The global shortage of microchips, which has affected new car supply, is boosting the demand for used cars, it said.
Kavak has invested in building a 15,000-square metre customer centre in Festival Plaza, Dubai. When fully operational, it will employ 150 mechanics and staff and will have a monthly capacity of 1,300 vehicles, the company said.
When it launches operations in Saudi Arabia, Kavak plans to build a 15,000-square metre customer hub in Riyadh.
All cars handled by Kavak will undergo a 240-point inspection before being purchased, it said.
Founded in 2016 by Mr Ottati, Kavak is a tech and data-driven marketplace for used cars. The company has a valuation of $8.7 billion and is backed by venture capital players such as SoftBank, General Atlantic and Tiger Global, among others.
The sixth-largest car dealer in Mexico, it claims to be the most valuable start-up in Latin America with 7,000 employees, an inventory of more than 30,000 cars and 75 operative hubs. It buys used cars, fixes and resells them.
In July, it announced an $180m investment to expand into Chile, Colombia and Peru, as well as into Turkey, its first venture outside Latin America.
The marketplace also said signed financing agreements with HSBC, Goldman Sachs and Banco Santander worth $810m last month as it looks to expand operations.
Carzaty, founded in Oman at the end of 2018 by Hassan Al Lawati and Marwan Chaar, uses proprietary data and market intelligence to buy specific cars that are in demand but are scarce. The company conducts rigorous checks and reconditions the cars before selling them.
The start-up raised about $5.5m in equity funding from strategic and high-profile investors, including the venture capital arm of IDO Investments, the government of Oman’s sovereign wealth fund.
“Quality standards have become the highest point of discordance in the global used cars market,” said Mr Chaar, who is now set to serve as the co-chief executive of Kavak GCC.
“The GCC region presents a vast opportunity to bring a transparent, high-level user experience for the buying and selling of used cars.”
An investment from the Omani government helped Carzaty to build the foundations of its business locally and expand into the UAE, which acted as a launch pad to scale, added Mr Al Lawati, who will also serve as the co-chief executive of Kavak GCC.
