A year ago, we told you about the opportunity that former Tesla CIO Jay Vijayan was chasing. His plan? To pull car dealers into the 21st century with a snazzy end-to-end automotive SaaS platform like the one he helped develop inside Tesla. Customers could use it to order a car to their precise specifications; dealers could use it to see in real time to understand their inventory and seamlessly check in customers for service appointments; OEMs could use it to see exactly which of their parts were where, relative to said dealerships.
The list of ways the software would produce savings and improve efficiencies for both dealers and OEMs went on and on, as Vijayan explained it.
His Pleasanton, California, company, Tekion, has gained meaningful traction since, too. According to Vijayan, the company’s revenue has grown threefold over the last year; the number of states where dealers are using Tekion’s software has grown to 39 from 28; and the company just began working with its first dealership in Canada as part of a plan to become an international outfit.
Perhaps accordingly, the company is today announcing $250 million in Series D financing that bumps its valuation a year ago from $1 billion to $3.5 billion today, and its total funding from $185 million to $435 million. Alkeon Capital and Durable Capital co-led the round. Other investors include Hyundai Motor Company, several dealer groups across the U.S., and earlier backers Advent International, Index Ventures and FM Capital.
Interestingly, the global chip shortage and other parts-supply disruptions that drove new vehicle sales down a whopping 26% last month, is only having a positive impact on Tekion, and a recent piece in Morning Brew suggests why.
When the outlet talked with the president of an automotive group in Columbus, Ohio, he said that with inventory scarce, a sale that would have taken four hours to make before the chip shortage now closes in 52 minutes. That scarcity is also driving profits through the roof, with buyers paying more for both new and used inventory, and auto retailers benefiting from lower operating costs with less inventory. (A dealership in Fort Lauderdale, Florida, told Morning Brew that its profits jumped 197% in Q1 2021 compared to Q1 2020.)
Courtesy of tech from Tekion and some of its legacy competitors, retailers are presumably also able to operate faster when it comes to servicing the consumers who are waiting out the shortage and hoping to make their cars last longer.
“The supply is less but the demand is strong, so everyone is making a lot of money,” Vijayan tells TechCrunch. “The dealers, the OEMs — they’re making a good amount of margin.”
Tekion, Vijayan adds, has been “very strong through that growth,” but he anticipates that next year will be even better when he foresees that inventory will begin to catch up to demand.
“I believe sometime next year there will be some level of correction in the market and that our technology platform will help both dealers and OEMs navigate the correction much more smoothly because it will continue to learn and evolve to provide insights on where they should focus their business.”
In the meantime, the growth of Tekion — whose operations are split between California and Bangalore, India — appears to be largely organic. Though the automotive world is known for spending lavishly on marketing and for aggressive sales tactics, just 17 of Tekion’s now 1,350 employees work in sales. “We don’t spend any money in marketing, or it’s very negligible. [We’re growing through] word of mouth,” Vijayan says.
A deal struck back in March with General Motors — which is an early investor in Tekion, as is BMW and the Nissan-Renault-Mitsubishi Alliance — is also surely helping. Though it’s up to each franchise to opt in or out, GM dealers broadly are beginning to use Tekion’s white-labeled dealer management software to make it easier for customers to purchase an Chevy, Cadillac, Buick or GMC brand electric vehicle.
The platform reportedly operates similar to GM’s existing Shop. Click. Drive. program, which allows users to search for certain GM vehicles at dealerships near them and complete a portion of the transaction online. It’s a lot better, though. So said one Chevrolet VP in conversation earlier this year with Automotive News, who described Tekion’s software as akin to GM’s internal program “on steroids.”