Onto raises $175 million in Series B to expand EV subscription service in the UK

Onto has raised $175 million in a combined equity and debt Series B round, capital the U.K.-based electric vehicle subscription startup plans to use to expand within the country as well as move into new markets.

This latest round brings Onto's total funding to $245 million. Swedish VC Alfven & Didrikson is leading the round on the equity raise, and British investment company Pollen Street Capital is providing a senior-secured asset-backed debt facility. The company says it plans to double its fleet size every three to six months, and that any new vehicles will be used as collateral. Onto did not disclose how much of the round came from equity versus debt.

The car-as-a-service company is finding that sweet spot between society's growing adoration for subscription services and EV adoption driven by legislation. The U.K., like many other countries, is banning internal combustion engine new car sales by 2030, so more people are looking for ways to make the switch to electric.

That shift from gas to electric is accelerating. New registrations of all-electric and plug-in hybrid vehicles had a market share of 10.7% in the UK in 2020, according to the Society of Motor Manufacturers and Traders. That's up from 6.6% in 2019. The organization noted that battery and plug-in hybrid electric cars together accounted for more than one in 10 registrations, up from around one in 30 in 2019.

Buying a car is often considered one of the worst investments you can make; it's an asset that both depreciates and costs money the moment a customer buys it through financing. Yet there are millions of new car sales each year in the U.K. With a market size that large, Onto founder and CEO Rob Jolly thinks there's plenty of room to make the subscriptions business a sustainable and profitable one.

Our total cost of ownership is very comparable with having your own car but you don't have to worry about charging fees or servicing," Jolly told TechCrunch. The ballpark cost is 330 (~$450) per month. There's no upfront deposit, which is huge. What we're trying to do is remove all the barriers and actually make it easier for people to recognize that having a car on subscription is actually easier and more affordable than having a petrol or diesel car."

A brief glance at Onto's website shows that the 330 ballpark is only accurate for certain cars at the lower range of the company's fleet of 3,000 vehicles. The middle range could be a Peugeot at 450 (~$622) or a Hyundai at 560 (~$775), and high range could be a Jaguar or Tesla at 1299 (~$1,800).

If we crunch the numbers for leasing a Hyundai Kona, for example, the price is comparable depending on the lease length, which determines the monthly rate. Longer leases tend to have less monthly payments than shorter leases, and different sites have either exceedingly cheap or curiously expensive lease quotes, so let's settle somewhere in the middle at 384 per month over a three year lease. This would be an annual cost of about 13,824 with a down payment of 3,456. The average cost of insurance for EVs in the U.K. is 2,264. The average person travels 35 miles by personal car per day, and the Hyundai Kona has a range of about 245 miles, so you really only need to fully charge it once a week. The average cost of charging the battery is about 10, so you're looking at about 520 per year on charging. Maintenance for electric vehicles is minimal and usually included in a lease agreement. Tally it up and you get a number in the ballpark of 20,538 (~$28.304) over three years. At 560 per month, Onto's service would cost a customer 20,160 (~$27,783) over the same three year period. When factoring in U.K.'s plug-in car grant, you could buy the car for 27,950 (~$38,620).

Onto's pricing is certainly comparable to other EV subscription businesses, like Steer in North America. Flux, in San Francisco, is markedly cheaper, offering Teslas for $600 per month, but it doesn't include the all-inclusive" services like road tax and insurance that Onto does. Granted, in the U.K., EV owners don't actually have to pay for road tax.

Among other things Onto says are included in a subscription are home delivery on its vehicles and access to free charging via network partners like BP Pulse, Tesla Supercharger, InstaVolt and as of earlier this year Shell Recharge. The company has partnerships with 10 car brands and rents out 12 different EV models, and is in the process of firming up more automaker partnerships. Jolly wouldn't share specifics on future partnerships. However, updates to the company's website, which shows most recent additions of car models to book, suggest Volkswagen and its 2021 e-Up! will be the latest.

EV subscription service Onto partners with Shell to expand access to charging

Jolly said it might take a while for the masses to catch on to both EVs and subscriptions, but he's confident that offering customers a white-glove service that can be canceled anytime makes the choice as easy as possible. In fact, Jolly said Onto is very nearly profitable.

Onto's lead investor, Alfven & Didrikson (A&D), which usually invests in more SaaS businesses, has a long term investing structure. This has allowed the VC to take bigger bets on businesses like Onto's that requires large upfront costs, according to Tiyam Afshari, partner at A&D.

We're happy to take those bets that we see are transforming an industry," Afshari told TechCrunch. Subscription as a form of ownership when it comes to cars is just a no-brainer if you look at all the hassle that comes from owning a car. So we feel quite strongly that the subscription model should and will grow to quite a significant part of the financing industry, and Onto is in a prime position to capitalize on that."

Given its lead investor's long term bet on Onto, it's perceivable that the company might look towards Sweden as it seeks to expand outside the U.K. After all, the Scandinavians have taken to EVs faster than other countries, and another EV subscription service in Norway, imove, recently raised $19 million in a Series A.

For many users, the EV subscription service isn't just about not having to worry about things like road tax, auto insurance and servicing. It's about the flexibility of keeping up with the latest EV models.

The iPhone has updates every year because the tech is improving and the battery life gets slightly better," said Jolly. The same thing is going to happen and already is happening with EVs. We're seeing that this is car ownership now for millennials. They can swap in for the latest and greatest car when it comes out, even if it's just a car with 30 miles extra range. And that's hugely prevalent within our customers."

For Simon Smith of East Devon, 32, it's never been about trying out the newest car. He joined Onto's service in 2019 for ethical and financial reasons, and has found the different iterations of the Renault Zoe ZE40 to suit his needs entirely.

It's still the most affordable way for me to drive electric," Smith told TechCrunch. I really wanted to go electric, but there wasn't any obvious way of doing that or making that happen in 2019, and I would say it's still fairly limited in the U.K. If you wanted to go electric, you'd probably have to save up a good deal of money even to buy second hand, and then you just wouldn't have the flexibility."

Smith says using Onto is a good approach for people who want to try before they buy, as well, which is no doubt at least partly why automakers like Tesla, Hyundai, Jaguar, Audi and Peugeot are interested in partnering up.

Again, it's an enormous market, of which we can kind of sit hand-in-hand with the car manufacturers and dealerships and the other aspects where we are one of a number of methods people have of acquiring the car now," said Jolly.

Existing investors Legal and General, Campden Hill Capital and JamJar also participated in the equity round, alongside new investments from TotalEnergies Ventures, Vlerick Group, Dutch insurer Achmea Innovation Fund and the family office of Jim O'Neill. Lazard acted as financial advisor to Onto.

This article was updated to reflect new information regarding car leases in the U.K.

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