Estonia-founded and South Africa-based vehicle rental startup Planet42 has announced that it has raised a $100 million round to scale its operations across South Africa and Mexico.
The investment, according to CEO Eerik Oja, comprises $15 million of equity from new and existing shareholders including Naspers Limited, Andrew Rolfe, Change Ventures, $10 million of debt from shareholders and a $75 million credit facility from Rivonia Road Capital.
The funding will be used to ramp up the company’s South Africa operations and further accelerate the process of penetrating the Mexico market.
“In South Africa, we want to put the pedal to the metal using this new financing to quickly add about 10,000 more cars to the fleet,” said Oja to Bloomberg.
“In Mexico we are exploring where best to find customers, and how to switch on dealerships, so it takes time to get the ball rolling, but we have started to test the market and have about 250 cars that side.”
He stated that the reason for gunning for the Mexican market was a result of the similarities they realised between the country’s operating environment and that of South Africa.
“It’s very similar to South Africa in terms of income and car penetration and development or lack thereof, of financial services,” Oja added. “Plus public transportation there is slow, unreliable and dangerous, opening up a big market opportunity.”
Planet42 employs proprietary algorithms and data points to score a customer’s risk level and generate an offer to buy a car from a dealership of choice within minutes. The startup claims to have almost a thousand car dealerships in its network which generates about 40% of its sales.
Planet42 also further claims that its product fosters inclusion in mobility in South Africa by plugging the hole left by the country’s major banks who are very risk averse in extending credit to consumers to enable them to buy their own cars and also addressing the issue of unreliable public transport.
In an interview with TechCabal in August last year, Planet42 managing director, Grant Wing, stated that they aimed to capture about 1% of the used car market annually, which translated to about 200,000 cars in total fleet size. The $100 million will come in handy in achieving this.
According to Mordor Intelligence’s Car Rental Market – Growth, Trends, COVID-19 Impact, and Forecasts (2022 – 2027) report, the global car rental market was worth $119.28 billion in 2021 and is expected to reach $223.07 billion by 2027 with a cumulative annual growth rate (CAGR) of more than 11% during the forecast period (2022 – 2027).
Although the report goes on to further classify Africa, together with South America and the Middle East, as a “low-growth” region in the sector, with $100 million in the bank, it looks like Planet42 and its investors are betting on the positive growth of the industry in Africa over the next few years.