Planet42, a South Africa-based car subscription company that buys used cars from dealers and rents them to customers through a subscription model, has raised $30 million in equity and debt.
The investment — which co-founder and CEO Eerik Oja called a bridge round — is a prequel to a bigger Series A round next year. It includes: $6 million in equity and $24 million in debt financing.
The company raised $2.4 million in a starting round in June 2020 and followed $10 million in debt from emerging-markets-focused venture capital fund Lendable in December. The fund doubled its participation in this recently raised debt round to $20 million, while other investors did the rest.
Naspers, through its early investment vehicle, Naspers Foundry, led the stock round with $3.4 million. Existing investors include Change Ventures, the lead investor of Planet42’s starting round, as well as Startup Wise Guys, Martin and Markus Villig of Bolt and Ragnar Sass of Pipedrive.
Planet42, although based in South Africa, has Estonian roots due to the heritage of its founders: Oja and CFO Marten Orgna founded the company in 2017. In an interview, Oja said they created the car subscription model to cater to individuals who are ignored by South African banks when they need car financing..
“Our car subscription [model] is social including. For us, the differentiating factor is that without us our customers wouldn’t have a car,” said Oja, adding that because the company buys used cars, unit costs are lower compared to a subscription model that buys new cars.
In most emerging markets, getting a personal car can be a challenge, especially if one’s income is not stable. And without a good credit history, lenders tend to ignore people with bad credit or give them unfavorable interest rates on auto financing.
Planet42 is one of the few upstarts targeting the African market, addressing this inequality through a car subscription offering. The company claims to use proprietary scoring algorithms that are superior to traditional credit scoring when assessing risk in underserved customer segments.
The company has more than 700 dealers. And with its algorithms, customers can find out what budget suits them and choose new or used cars from Planet42’s dealer network.
Then Planet42 buys the car and rents it out to the customer on a subscription basis. Planet42 claims that of all customers served to date, 89% would not have had any other way to access a personal vehicle.
“We’ve gotten so good with our score that we’re now enabling customers who couldn’t get bank financing to buy a brand new car. We’ve come up with a way to do it durable that we can put brand new entry-level cars into the hands of the same target market and customers that are unfair ignored by banks,” said the CEO.
Four years on and raised $50 million in equity and debt later, Planet42 has offered more than 7,000 cars to customers in South Africa. This number was 3,000 when Oja spoke to BestFitnessBands in March, noting that the company grew 25% month over month in 2021..
Autochek and Moove are other companies offering similar services in parts of sub-Saharan Africa. While Moove focuses on financing ride-hailing cars, Planet42 and Autochek services are focused at private persons. Planet42 has a cohesive network of automotive stakeholders on its platform.
Both Moove and Autochek have since penetrated other African countries initial launched from Nigeria. But for Planet42, the next attractive market lies outside the continent.
“Goods only don’t do it now, but we don’t rule it out for the future,” Oja replied if Planet42 would expand to other parts of Africa. “However, the main reason is the market size. South Africa has about 25% of all passenger cars on the African continent; that means whatever market we go in Africa will do too necessary smaller than South Africa. In South Africa, 1.1 million used cars are sold and bought every year. In Mexico, that number is 7 million. The Mexican market is therefore six times larger than South Africa. So we want to go for the real big markets.”
The company said it has purchased its first cars for customers in Mexico. Similar challenges due to transportation inequality abound in the country, where 63% of the population has to deal with cash alone.
But Mexico is one of the few countries that Planet42 plans to expand into in the near future, said Oja, who also said the company has set up an office and has two employees.
He said the company hopes to have purchased more than 1 million vehicles for its customers in its current and future markets by 2025. Planet42 said it has also made progress towards becoming a carbon neutral company through a wind farm project in Northern Cape, South Africa. The car subscription company financed the farm for months with money from carbon offset credits.