Yahoo Finance Canada Drives raises $79.4 million to expand online car purchasing and delivery platform
Canada Drives, an online car shopping and delivery platform, announced $79.4 million ($100 million CAD) in Series B funding that it will use to expand its service across Canada.
It was founded in 2010 as a car financing company but launched an e-commerce platform for used vehicles last year. Canada Drives currently operates in British Columbia and Ontario, two provinces that together comprise about half of Canada's entire population, according to Canada's 2016 census. With the new funds, Canada Drives hopes to expand to Alberta in the next month, according to co-CEO Cody Green.
The pandemic boosted online shopping in every industry, and car buying is no exception. And now that companies like Canada Drives are beginning to provide a platform to shop and buy, as well as next-day delivery, this market will only continue to grow.
Nobody likes going to the car dealership anyway, and the data support that: A recent study by consumer intelligence company J.D. Power found people are taking to digital car sales because they want to avoid face-to-face interactions and haggling with salespeople, and they like doing paperwork and financing at home. They're also more likely to buy add-ons when they can shop at their leisure rather than experiencing the pressure of a commission-hungry dealer breathing down their necks.
While there are many online car shopping platforms in the U.S. that have grown in popularity over the past couple of years, like Carvana and Vroom, Canada hasn't seen the same sort of growth. But with companies like Canada Drives and Clutch, another online car marketplace that recently raised $20 million CAD in seed funding, Canadian entrepreneurs are wising up to the model that's already been proven across the border. The global chip shortage is also causing a growing market for used vehicles as it becomes more expensive and difficult to purchase new cars.
In order to meet those needs for Canadian consumers, Canada Drives is going to use its recent funding to keep enhancing the product, grow its inventory in existing and new markets and hire around 200 people over the next year, particularly in product development, Green told TechCrunch.
The company owns its entire inventory of vehicles. It certifies, inspects and reconditions the used cars that come its way, stores them throughout its operating zones and delivers them to the customer's door when they purchase. Customers get a seven-day trial with their vehicle, and if it's not to their standard, they can have it picked up and returned with no questions asked.
Green said he expects to see an increasing amount of hybrid or electric vehicles on the platform, and a spokesperson for the company told TechCrunch that Teslas and Nissan Leafs are already quite popular. Canada has a goal to ban the sales of internal combustion engine vehicles by 2035, so it's a roll of the dice whether the marketplace will be littered with used ICE or flush with used electric vehicles over the next couple of decades. Currently, around 5% of Canada Drives' inventory is hybrid or electric, said Green.
"Our mission is to be the easiest place to buy or sell your car in Canada, and as consumer preferences change and as countries adopt forward-thinking policies with electric and hybrid, our platform is going to be able to evolve with that," Green told TechCrunch. "As there's more and more new electric vehicles, more will become used vehicles, and I think already that is a market that we're over-indexed on versus the average dealer in Canada."
This latest funding round brings Canada Drives' total funding to about $159 million ($200 million CAD) after a $100 million CAD Series A raised in 2019. The Series B round announced Wednesday was led by Jeffrey Housenbold’s Honor Ventures with participation from KAR Global and other strategic investors.
Correction: An earlier version of this article stated that Canada Drives sells new and used vehicles. The company only sells used.
