Online car retailer Cazoo has announced it will abandon its business in the European Union and cut 750 jobs in the latest sign of retreat by a business that had hoped to transform its sector.
The company will make redundant all of its employees in France, Germany, Italy and Spain as it closes the operations, leaving it operating in only the UK as it tries to preserve cash.
It is the second time in 2022 that Cazoo has cut 750 jobs, after announcing redundancies in the UK in June. It comes amid an intense squeeze on consumer spending as inflation surges across the world.
Cazoo, founded by the internet entrepreneur Alex Chesterman and launched in 2018, is one of a clutch of online startups that aimed to disrupt the used car industry by selling direct to consumers.
It is based in the UK but listed on the stock exchange in New York through a merger with a special-purpose acquisition company (Spac), led by the billionaire hedge fund manager Dan Och. Announcing that combination, Chesterman had said he wanted to “transform the way people buy cars across Europe”, and investors appeared to buy into that vision, with the company’s market value peaking at nearly $11bn (£9.6bn) in February 2021.
The company has been expanding rapidly, with revenues more than doubling year-on-year to £333m in the second quarter of 2022. However, losses for the same period came in at £243m – a cash burn that many analysts and rivals have long believed to be unsustainable.
The company’s market value has slumped in recent months to less than £1bn, but its share price jumped by more than 16% on Thursday as investors appeared to welcome the prospect of a slowdown in spending.
The decision to abandon the EU comes only a few months after Cazoo agreed to sponsor the French football club Olympique de Marseille in the latest in a string of sports sponsorships as part of its aggressive growth strategy.
In football’s top EU leagues, Cazoo also counts Spain’s Real Sociedad and Valencia, France’s Lille Olympique, Italy’s Bologna FC and Germany’s SC Freiburg. Cazoo has contacted the teams in order to negotiate an “orderly wind-down” of the sponsorships.
In the UK, Cazoo retains sponsorship of Aston Villa, the Hundred cricket competition, horse racing’s Derby and even FishOMania, a sports fishing event.
Chesterman, Cazoo’s chief executive, said abandoning the EU would protect the company’s balance sheet and ensure it did not need to call on investors for more funding.
He said the company faced a “challenging macroeconomic backdrop”, but said there was “still strong customer demand” in the UK.
“Given our target of reaching profitability by the end of next year, we have taken the tough decision to focus solely on the huge UK used car market, worth over £100bn annually,” Chesterman said.
“I would like to thank all our colleagues in the EU who are impacted by this decision, and we will of course look to support them in every way possible.”