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Wednesday, Aug 10, 2022

AutoGravity Races Into Car Finance World

AutoGravity is following the three kick-ass guidelines that Silicon Valley companies made famous.

The Irvine-based fintech company is in a kick-ass industry—car finance, where Americans buy about 16 million new vehicles and 20 million used vehicles a year.

“It’s a trillion-dollar-a-year industry,” said AutoGravity co-founder and Chief Executive Andreas Hinrichs. “It’s a huge market that’s hungry for innovation.”

In mid-2016 the company launched what’s become a kick-ass product—an application that’s been downloaded 1.5 million times and generated more than $2 billion in financing.

“We want to bring buying a car into the digital age for the millennial lifestyle,” Hinrichs said. “The way you buy a car today is essentially the same as a 100 years ago. Now there is a tidal shift because there is a generational change.”

It’s clear that Hinrichs has a deep understanding of the industry after spending two decades working in Daimler AG’s Mercedes-Benz financial unit. He even convinced his former employer to seed his company with $50 million.

Still, Hinrichs would like to tweak the third guideline—kick-ass management.

“Kick-ass team is what I would say,” Hinrich said while walking through AutoGravity’s new office. “One team, one dream is our motto.”

The company’s performance impressed judges who honored it with an Excellence in Entrepreneurship Award at the Business Journal’s 17th annual event on March 15 (see other profiles, pages 1, 4, 6 and 7).

“I’m blindsided,” Hinrichs told the audience of 300. “I have a German accent, but I do love America, and I do love Orange County. Both have embraced me with open hearts.

“We started in an empty room with a huge dream. We wanted to make buying a car as simple as ordering an Uber.”

German Native

Hinrichs was born and raised near Hamburg in northern Germany. He came to the U.S. to earn an MBA at the University of Louisville.

After college, he started working for Mercedes-Benz’ U.S. financial unit, where he rose to president of marketing. Along the way, he married an American, Melissa, and they had three children. Then he went to Asia, because “that was where everything was happening.”

He recalled, “When I left the U.S., it was the largest passenger car market for Mercedes-Benz. When I came back, China was by far the largest.”

He spent five years in Asia, where he had profit-and-loss responsibilities for various Daimler financial markets.

Hinrichs wanted to build a new financing system for the industry but realized it wouldn’t thrive inside of a large corporation like Daimler, which has 289,000 employees.

“There was too much complexity, too much red tape,” he said. “Techniques to manage a large global corporation are quite different from managing a nimble, aggressive startup.”

Daimler agreed and put the $50 million into AutoGravity, which also received financing from VW Credit Inc.

Daimler and Volkswagen are principal shareholders. Hinrichs declined to say if he or the other co-founders, Chief Operating Officer Nicholas Stellman and Chief Evangelist Officer Serge Vartanov, have stakes. Stellman was previously at Mercedes-Benz, while Vartanov, who also holds the chief marketing officer title, came from Boston Consulting Group.

In the past seven months, AutoGravity has signed auto financers such as Audi Financial Services, Hyundai Capital America and Nissan Motor Acceptance Corp. This month TD Auto Finance, a subsidiary of TD Bank, and Infinity Financial Services, jumped onto the platform. Hinrichs indicated other manufacturers, including American giants, may soon join.

AutoGravity isn’t competing with either dealers or lenders, he said.

“We don’t want to get into the dealership business of holding inventory.

We let our lenders do what they do best. They have huge balance sheets, low costs of funds, and very good efficiencies. We don’t want to compete with that.

“We focus on the digital consumer experience. That’s what the industry as a whole lacks.”

Fast Loans

The app seeks to make the car-buying experience as painless as possible, promising a result in four simple steps and under 10 minutes of work. If a user is approved for a loan, that person can pick up the car at a dealership in under a half-hour, rather than the typical three to four hours, he said.

“People have their phones in their pockets 24 hours a day,” he said. “We want to be right there when they think about researching and buying a car.”

The company has three key revenue streams. It charges lenders an origination fee that’s small by the industry benchmark, Hinrichs said. Second, dealers pay $299 per car sold.

“We do all the marketing. We’re sending customers to the dealers, preapproved and ready to go.”

The most lucrative stream may be marketing campaigns. The company has details about the consumer’s credit background and shopping behaviors. It’s developed a home page for each customer, similar to what internet giant Amazon does based on a consumer’s purchase history.

“We know where you are in the life cycle of your current vehicle. We can alert you. We can drive campaigns for our partners.”

Slide Show

AutoGravity moved last July to a Sand Canyon Avenue office that features a wide wooden staircase with a slide for those feeling young. A guitar signed by Sheryl Crow hangs on one wall. A section of the office includes couches where Friday night video game tournaments are played.

“We get people to stay longer and work harder,” Hinrichs said.

The employment base represents about 30 foreign languages. Half of its 110 employees are engineers, and the company plans to nearly double that by year-end in such fields as engineering, quality assurance and digital marketing, Hinrichs said.

The one big exception to the kick-ass template is that AutoGravity isn’t in Silicon Valley. Hinrich said it conducted a lot of research before settling on OC.

“Orange County impressed us, based on our location research that it is the right mix with nearby universities, airports and high-tech companies from which we could recruit.”

OC is home to the American headquarters of several auto giants, including Hyundai Motor America Inc. and Kia Motors America Inc. Some synergy might also develop, because another Irvine-based company, Springboard Auto, an online direct lender that connects customers with auto lenders, plans to double employment to 100 by year-end.

When asked why AutoGravity has a director of investor relations, which is more typical of a publicly traded company, Hinrichs said the executive is managing requests from private equity investors seeking stakes.

Does being in OC mean the company will receive a lower valuation than if it was in Silicon Valley?

“This is not about valuation,” Hinrichs said. “We’re going to be successful if the customer perceives value in us. We’re in it for the long run.”

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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