Latin America’s biggest startup Kavak expands footprint into Middle East

Kavak, Latin America’s highest-valued startup, is investing $130m over the next two years in the Middle East, pushing ahead to expand its used-car operations despite the global economic downturn.

The Mexico City-based company is branching into the UAE and Oman, through a merger with Oman-based Carzaty, and into Saudi Arabia with its own operation, the company said in a statement.

The expansion follows moves into Colombia, Chile, Peru and Turkey earlier this year, on top of existing operations in Brazil, Argentina and Mexico, bringing Kavak’s reach to 10 countries.

“I now feel satisfied with our global footprint to now really narrow the focus,” said founder and Chief Executive Officer Carlos Garcia Ottati in an interview, adding that the rapid expansion this year is sustainable with current funds.

The new territories added this year are “operating very lean,” he said. “We don’t expect for these countries to be cash-burning machines.”

Kavak, which operates showrooms and online platforms for customers to buy and sell cars, was valued at $8.7bn in a funding round that concluded in September 2021, making it Latin America’s most valuable startup before the market downturn this year. Garcia Ottati said he expects to list the company, which also offers financing, in an initial public offering in US markets within three to five years.

“We don’t expect any funding rounds this year and next year, probably,” Garcia Ottati said, referring to equity capital raising efforts. “It depends a lot on where the markets are and it depends a lot on where our vision is and how the business is tracking. But as of now, we’re running this business as a fully-funded business plan.”

Garcia Ottati said the new Middle East countries are part of a $35bn market and that Kavak expected the region to eventually make up 7 per cent -12 per cent of the startup’s business.

Operations in Mexico will soon become profitable and the company as a whole was on track to be in the green by the first quarter of 2024, he said. Brazil posted strong growth in August and was already making up about 20 per cent of the business after Kavak’s launch there last year.