Irvine’s AutoGravity Corp., a closely watched area fintech firm initially known for its mobile application that connects car buyers with lenders and dealers, is driving a new business.
The company last week launched “Turn,” a subscription service to give consumers the ability to rent used cars for as short a period as a month. The company said consumers don’t want “to lock themselves into mini-mortgages” when buying or leasing cars.
“I think there is a new segment evolving—a subscription service for young used cars that someone else leased as new,” Chief Executive Alex Mallmann told the Business Journal.
The Turn service includes doorstep delivery, auto insurance and basic maintenance such as oil changes, tire rotations and roadside assistance.
Through partnerships with its investors, Mercedes-Benz and Volkswagen, the company purchases cars that have been leased for two to three years, and with about 20,000 to 30,000 miles on them, and turns around and offers them to consumers for a monthly rate ranging from about $500 to $700.
Mallmann said that at the time a consumer signs up, there is a startup payment about three times the monthly payment, so an Audi that costs $500 a month has a $1,500 startup payment.
Long, Winding Road
AutoGravity started in 2016 by people with plenty of experience in tech and the auto industry, including former CEO Andy Hinrichs, who spent two decades working at Daimler AG’s Mercedes-Benz’s financial unit.
The main focus for the company at its inception was to provide a website with information about autos and thus present leads to lenders and dealers.
“We wanted to make buying a car as simple as ordering an Uber,” Hinrichs told the Business Journal last year.
In less than two years, its app was downloaded more than 2 million times. The company said it generated more than $2 billion in loans for lenders.
The company won a number of prominent fans. Mercedes-Benz and Volkswagen bought into the idea, investing nearly $80 million.
AutoGravity spent some of that money on cool space headquarters in the Spectrum area of the city that included a wooden slide from the second to first floors. It had stated plans as of early 2018 to expand from 130 to 200 employees within a year.
Exec Turnover
However, Hinrichs—named a 2017 All Star in the finance and insurance category by Automotive News—left in the middle of last year, followed out the door by Chief Operating Officer Nick Stellman and a few others.
Hinrichs and Stellman have since started another fintech company that builds online sales platforms for dealers, Digital Motors (see story, page 5).
After Mallmann, also a veteran executive who worked for two decades at Daimler, took over the CEO role last year, he told the Business Journal that he had a reputation as an executive who can fix problems. He aimed to create a “better, clearer shopping experience” for consumers from end to end.
While the company is generating revenue, Mallmann declined to disclose the amount, when speaking with the Business Journal last week.
The company, which has yet to reach the 200 employee mark, is proceeding with “a cost-conscious” mindset and “shareholder perspective,” he said.
“What I’ve learned from the past in this beautiful building here is that you need to be careful how you scale the business,” Mallmann said, motioning to the AutoGravity office, which includes a bar stocked with snacks.
When asked whether the company may move out of its Sand Canyon Avenue headquarters, he said, “Who knows?”
“We’re taking it very slowly, learning and making mistakes.”
“Right now, the business looks outstanding. Very soon, we’re going to be ready to put gasoline on the fire.”
The company’s website no longer touts how many times its application has been downloaded nor how many billions of dollars in loans generated for lenders.
New Focus
Nowadays, the company’s homepage is dominated by used car sales. It is focusing more on providing car buying leads to dealers rather than loan leads to lenders.
In the past year, AutoGravity has brought about 50 dealers into its network, in addition to the 16 or so lenders that it works with to finance car purchases.
Mallmann said that the dealers—who pay a subscription fee—can integrate AutoGravity’s car buying platform into their site or “whatever they want” to help them digitize the platform.
“The business is more about helping the dealers to digitize their platform because at the end of the day, cars are sold through and financed through dealers.”
Mallmann has hired a former colleague from when the pair worked in China. Miekie Liebenberg, who was CEO of Mercedes-Benz Leasing Co. in China, in April joined AutoGravity as vice president of business development where he’ll be in charge of Turn.
On the Right Track
The company has another potential revenue stream if a consumer wants to buy the car that is on a short-term lease.
“Now comes the beauty of AutoGravity,” Mallmann said. If a consumer is interested in buying the car, “I can digitally approve you for a loan through our platform, on your iPhone, and get you your car.”
As it increases its inventory of electric cars for lease, it’s also considering adding charging stations at no cost to Turn customers. Such a move is of particular interest to its shareholders Mercedes and Volkswagen, Mallmann said.
The Turn service is already benefiting Daimler, because it’s able to sell fairly new cars to AutoGravity, rather than losing money at auctions.
Currently, the service is in Orange County and Los Angeles. Mallmann said it’s proceeding carefully when expanding to other cities.
The company is also planning on taking Turn international in the future, including “a nearby country” and a European nation.
“That is just the beginning.”
Mallmann said that there is a synergy between the new division and the company as a whole, and foresees a “promising” future.
“I’m a big believer in [Turn]. I believe as soon as young people realize they can rent a well-maintained used car, like new, without facing the depreciation curve, they will.”
