Automotive News Canada - April 2023 - 14

14
* APRIL 2023
Canada Drives plans deep job cuts as it abandons online sales
The used-vehicle
e-commerce company
seeks a buyer or fresh
investment as part of its
restructuring process
By DAVID KENNEDY
T ORONTO BUREAU CHIEF
CANADA DRIVES AIMS TO FULLY
wind down its online used-vehicle sales
business by June 11 - eliminating hundreds
of jobs and selling remaining inventory
- according to a report filed with
the Supreme Court of British Columbia.
The filing from court-appointed monitor
PricewaterhouseCoopers Inc. (PWC), made
ahead of a March 30 hearing, came after
Canada Drives was granted creditor protection
March 20.
Under the Companies' Creditors
Arrangement Act (CCAA), Vancouverbased
Canada Drives said the e-commerce
business it launched in 2020 is facing sustained
losses. It plans to restructure, abandoning
online sales to instead focus on its
lead-generation segment, which the company
said has operated profitably since 2010.
By May 7, Canada Drives expects to
have sold off its stock of vehicles. It had 810
used vehicles remaining in inventory as
of March 24, down from about 1,250 a week
earlier. Eight trucks and 63 trailers the
company used to deliver vehicles to customers
across Canada are also to be sold.
LAYOFFS EXPECTED TO EXCEED 300
Canada Drives plans to reduce its work
force to 45 employees by June 11, according
to the PWC report. The company had
326 staff at the time of its initial CCAA
filing. Layoffs are expected to total more
than 300.
To retain staff deemed integral to
the wind-down process, Canada Drives
received court approval March 30 to
implement a key-employee retention plan:
17 employees will receive a premium on
their salaries for remaining with the company
as it jettisons its e-commerce assets.
A sale or fresh investment in what's left
of Canada Drives will follow as the next
step in the restructuring process.
Goeasy Ltd., which is the company's
largest unsecured creditor following a
$40-million investment last June, is one
possible buyer. The Mississauga, Ont.based
nonprime lender " has expressed
interest in the ongoing business, " according
to PWC's report.
" Additional parties " have contacted
both Canada Drives and PWC " expressing
an interest " in the anticipated sales process,
the report adds.
An amended court order staying creditor
action against the company until May
15 was issued by the Supreme Court of
British Columbia following the March 30
hearing. - ANC
For used vehicles, a retailing reboot
For Canada Drives
and Clutch, online
retailing fell flat. The
failures appear to
have little to do with
shoppers' acceptance
of digital technology
By DAVID KENNEDY
T ORONTO BUREAU CHIEF
THE RESTRUCTURING OF
Canada Drives and recent turmoil
within the online used-vehicle
segment in
North America
have cast a
shadow over
the prospects of
retailers with
fully online
sales models.
Industry insiders
- including
Canada
Drives CEO
Cody Green -
are growing
doubtful about
the profitability
of automotive
e-commerce.
The
Richardson:
Vancouverbased
company
was granted
creditor protection
March 20,
claiming in a
release that its
Dealerships
have cut into
the early
advantages
of online
retailers, to
the degree
that the
business
model is " not
feasible in
its current
iteration. "
FILE PHOTO
online used-vehicle sales business
was " no longer viable " in the long
term. Green pointed to the high
cost of holding inventory, among
other industry headwinds, in a
March 19 affidavit submitted in
support of Canada Drives' court
filing.
This assessment of the online
sales model is " bang on, " said
Colin Richardson, a principal
in consultancy Omni-Channel
Automotive Solutions and the
business-development lead for
North America at the auto tech
company Phyron Software.
" It's not feasible in its current
iteration, " he said. Dealerships
have made up ground on online
sellers since early in the pandemic,
eroding the new entrants' competitive
advantages, Richardson
said.
" The differentiators that they
had going to the consumer - buy
online, delivery to home, things
like that - are so easily replicated
by a solid, high-performing
dealer group. "
MANAGING INVENTORY IS KEY
Dealers are already closing
the gaps that disrupters are
working to exploit, said Shahin
Alizadeh, president
of the
Toronto-based
Downtown
AutoGroup.
" That hole in
the auto industry
is shrinking
in a massive
way. "
Most dealers
recognized
over the past
few years that
they needed to
embrace new
technologies to
stay relevant,
Alizadeh:
Dealers have
used online
tools to
disrupt the
disrupters.
FILE PHOTO
Alizadeh said. Forward-thinking
retailers have turned to new
tools to manage inventory, keep
tabs on the wider industry, and
reach and retain customers, he
said.
Experience also paid dividends
as used-vehicle prices
rose, peaked and began a
slow decline. According to the
Canadian Black Book Used
Vehicle Retention Index, values
reached their highest point in
Green: Industry headwinds,
including the high cost of holding
inventory, are conspiring against
used-car online disrupters.
FILE PHOTO
Clutch CEO Dan Park blamed
the tight capital environment in
the technology industry for the
move, adding that Clutch had
" secured its future " by opting to
refocus on its best-established
markets.
Park is confident the company
made the right move.
In filing for creditor protection in March, Canada Drives said its
online used-vehicle sales business was " no longer viable " in the
long term. PHOTO: CANADA DRIVES WEBSITE
ONLINE-RETAILING
SPOTLIGHT
March 2022 before declining 5.4
per cent through December.
In response, dealers slimmed
down their inventories, even if
it meant taking losses, Alizadeh
said, while online sellers did not
necessarily do the same.
" When you don't manage your
inventory based
on realities in
the market and
hope and pray
that if you create
it, the customers
will come, eventually
it'll catch
up with you. "
Viewing
inventory as
a potential
" land mine, "
a Vancouverbased
online
vehicle retailing
startup
has structured
its business to
avoid owning
vehicles.
Wood: Online
retailer
MintList " will
never hold
inventory,
and I say
'never' quite
definitively. "
SUPPLIED
PHOTO
" We will never hold inventory,
and I say 'never' quite definitively, "
said MintList CEO Mike
Wood.
GOAL IS TO SUPPORT DEALERS
Wood, who spent more than 30
years in the auto industry before
co-founding MintList in 2020, said
the platform takes a complementary
approach to the current sales
environment.
" We're not looking to disrupt
the dealership model, " he said.
" We're just looking to assist the
way the consumers buy and sell
cars. "
The MintList platform, which
is in use in British Columbia and
Alberta and soon will launch in
Ontario, allows dealers to bid on
consumer vehicles in online auctions,
giving sellers transparency
into how their vehicles are valuated.
MintList also lists used inventory
from the roughly 170 dealers
currently on its platform.
As opposed to acquiring vehicles
and looking to turn a profit
on them, the company charges
fees to dealers selling a vehicle
and to dealers purchasing consumer
vehicles via auction, Wood
said.
The tool is one alternative to
the capital-intensive model used
by Canada Drives and other automotive
e-commerce businesses
that have run into trouble since
late 2021.
STRING OF LOSSES, LAYOFFS
In the United States, online
sellers - most notably Carvana
Co., Vroom Inc. and Shift
Technologies Inc. - have each
watched their stock prices plummet
more than 90 per cent over
the past 18 months amid significant
layoffs and steep operating
losses. Management teams at the
pared-down businesses continue
to work toward profitability,
but cash flow at each company
remained heavily negative as of
the fourth quarter of 2022.
Clutch, a competitor to Canada
Drives, announced in January
that it would lay off 65 per cent of
its work force and exit Western
Canada after a planned financing
round fell through. At the time,
" They've been tough decisions,
and a lot of hard work has gone
in over the last year to make
sure that we are sustainable, " he
said, " and that's starting to pay
dividends over the last several
months. "
Park said he
has no doubts
about the viability
of Clutch's
business model.
Unlike
Canada Drives,
he said, Clutch,
founded in
Halifax in
2016, was " purpose-built
to
sell cars online
from Day 1. "
The company
continues to see
strong demand
as it focuses on
the fundamentals
that make
used-vehicle
sales profitable
Park:
Pulling out
of Western
Canada
and laying
off workers
means that
profitability
for Clutch is
" just on the
horizon. "
FILE PHOTO
for businesses, whether they be
brick-and-mortar or online sellers.
" You
have to have high-quality
inventory that you turn super
quick and are efficient with, "
Park said.
Access to relatively inexpensive
capital over the past several
years set off " the push to really
become the largest player as
fast as possible, " Park said. That
environment has now shifted as
growth capital across the technology
sector dries up.
" The folks that were able to
kind of pull back and rightsize
the business are in a better position
longer term, " he said.
Clutch might have a smaller
geographic footprint than it did
at the start of the year, but it is
also running more sustainably,
with profitability " just on the
horizon, " Park said. Pushing into
the black is the company's focus
short term, he said, with a return
to Western Canada a longer-term
goal. - ANC

Automotive News Canada - April 2023

Table of Contents for the Digital Edition of Automotive News Canada - April 2023

Automotive News Canada - April 2023 - Intro
Automotive News Canada - April 2023 - CT1
Automotive News Canada - April 2023 - CT2
Automotive News Canada - April 2023 - 1
Automotive News Canada - April 2023 - 2
Automotive News Canada - April 2023 - 3
Automotive News Canada - April 2023 - 4
Automotive News Canada - April 2023 - 5
Automotive News Canada - April 2023 - 6
Automotive News Canada - April 2023 - 7
Automotive News Canada - April 2023 - 8
Automotive News Canada - April 2023 - 9
Automotive News Canada - April 2023 - 10
Automotive News Canada - April 2023 - 11
Automotive News Canada - April 2023 - 12
Automotive News Canada - April 2023 - 13
Automotive News Canada - April 2023 - 14
Automotive News Canada - April 2023 - 15
Automotive News Canada - April 2023 - 16
Automotive News Canada - April 2023 - 17
Automotive News Canada - April 2023 - 18
Automotive News Canada - April 2023 - 19
Automotive News Canada - April 2023 - 20
Automotive News Canada - April 2023 - 21
Automotive News Canada - April 2023 - 22
Automotive News Canada - April 2023 - 23
Automotive News Canada - April 2023 - 24
Automotive News Canada - April 2023 - 25
Automotive News Canada - April 2023 - 26
Automotive News Canada - April 2023 - 27
Automotive News Canada - April 2023 - 28
Automotive News Canada - April 2023 - 29
Automotive News Canada - April 2023 - 30
Automotive News Canada - April 2023 - 31
Automotive News Canada - April 2023 - 32
Automotive News Canada - April 2023 - 33
Automotive News Canada - April 2023 - 34
https://www.nxtbook.com/nxtbooks/crain/canada_202402_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202401_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202312_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202311_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202310_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202309_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202308_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202307_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202306_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202305_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202304_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202303_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202302_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202301_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202212_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202211_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202210_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202209_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202208_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202207_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202206_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202205_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202204_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202203_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202202_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202201_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202112_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202111_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202110_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202109_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202108_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202107_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202106_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202105_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202104_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202103_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202102_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202101_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202012_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202011_ifm
https://www.nxtbook.com/nxtbooks/crain/canada_202011_acg
https://www.nxtbook.com/nxtbooks/crain/canada_202011_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202010_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202009_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202008_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202007_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202006_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202005_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202004_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202003_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202001_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201912_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201911_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201910_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201909_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201907_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201906_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201904_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201903_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201902_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201901_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201812_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201811_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201810_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201809_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201808_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201807_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201806_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201805_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201804_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201803_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201802_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201801_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201712_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201710_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201709_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201708_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201707_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201706_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201705_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201704_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201701_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201612_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201611_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201610_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201609_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201608_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201607_v2
https://www.nxtbookmedia.com