InstaCarro Raises $23 Million to Go After the Used Car Market in Brazil, but Kavak is There, Too

Two companies, two angles, one market -we look at how these companies and their strategies compare.

Luca Cafici is changing the way Brazilians buy and sell used cars with an innovative business model
By Marcella McCarthy (EN)
August 14, 2021 | 08:30 AM
Reading time: 2 min.

Miami — Selling a used car in Latin America can be a challenge, and ironically, getting the best price can often be the least of your worries. The process opens doors to thieves and fraudsters looking to take advantage of the situation. But thanks to startups like Kavak and InstaCarro, the sector is changing - and fast.

“People who want to rob you target premium cars in classifieds and then they meet with you and rob you,” said Luca Cafici, founder and CEO of InstaCarro, on the heels of their recent $23 million Series B funding round. InstaCarro has raised a total of $56 million.

The two companies approach the challenges of buying and selling used cars in different ways, started in different countries, and the founders have very different backgrounds. But today, both companies are after the same illustrious Brazilian market.

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Kavak, which was founded in Mexico 2016, is an online marketplace that aims to bring transparency, security and access to financing to the used car market. The company offers its own financing through its fintech arm, Kavak Capital. And speaking of capital, it’s raised a ton of it: more than $900 million at a $4 billion valuation which positions itself as one of the most valuable startups in LatAm. The “startup” expanded to Brazil earlier this year.

Carlos García Ottati, Kavak’s co-founder and CEO, is originally from Colombia, but moved to Mexico a few years ago and had a really hard time buying a used car because of the amount of fraud that surrounded the transaction. That’s what sparked the idea for the company.

InstaCarro, founded in São Paulo in 2015, sells used cars to dealers across Brazil through an online auction targeted at about 4000 dealers. If you’re the seller, InstaCarro guarantees a sale within 24 hours, and facilitates the entire process from end-to-end.

“Different people have different perceptions of what a car is actually worth, so when you do an auction you can get the best price,” Cafici told Bloomberg Línea.

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Cafici, who is Argentinian, moved to Brazil to start the business after working at an online car classifieds company in Vietnam called Carmudi. A key component he identified at Carmudi and helped solve, was that people weren’t great at taking photos of the cars. So today, InstaCarro sends someone to take the photos for you.

Unlike Kavak, which has been trampling LatAm like a monster car, InstaCarro remains only in Brazil but is penetrating the market deeply.

“With the new capital, we will improve the coverage of our home inspection model in every city we operate in, and continue to launch new cities until Brazilians in every major city can sell their car online through InstaCarro,” Cafici said.

But they have other plans for the money, too. InstaCarro wants to become a dealer themselves, which would officially put them head to head against Kavak.

“We have heard from our customers that more than half would like to buy a car through InstaCarro as well. With the capital from this round, we will build out a full service car trading platform and give our customers the ability to buy through InstaCarro, too,” said Cafici.

Now, we’ll have to sit back and see how this battle plays out.