“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, California, when asked about the management software on which most car dealerships rely for inventory information, marketing, customer relationships and more.
Castelino, the dealership’s service director, laughs as he says this. But the joke has been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with more sophisticated point solutions.
It’s the precise opportunity that former Tesla CIO Jay Vijayan concluded he was well-positioned to address while still in the employ of the electric vehicle giant.
As Vijayan tells it now, he knew nothing about cars until joining Tesla in 2011, following 12 years in product development at Oracle, then VMware. Yet he learned plenty over the subsequent four years. Specifically, he says he helped to build with Elon Musk a central analysis system inside Tesla, a kind of brain that could see all of the company’s internal systems, from what was happening in the supply chain, to its factory systems, to its retail platform.
Tesla had to build it itself, says Vijayan; after evaluating the existing software of third-company providers, the team “realized that none of them had anything close to what we needed to provide a frictionless modern consumer experience.”
It was around that time that a lightbulb turned on. If Tesla could transform the experience for its own customers, maybe Vijayan could transform the buying and selling experience for the much bigger, broader automotive industry. Enter Tekion, a now four-year-old, San Carlos, California company that already employs 470 people locally and in Bangalore and just attracted $150 million in fresh funding led by the private equity investor Advent International.
With the Series C round — which also participation from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether.
It’s also valued at north of $1 billion. (The automakers General Motors, BMW and the Nissan-Renault-Mitsubishi Alliance are also investors.)
Eric Wei, a managing director at Advent, says that over the last decade, his team had been eager to seize on what’s approaching a $10 billion market annually. Instead, they found themselves tracking incumbents Reynolds & Reynolds, CDKGlobal and Cox Automotive’s Dealertrack — and waiting for a better player to emerge.
Then Wei met Tekion through Jon McNeill, a former Tesla president and an advisory partner to Advent.
Says Wei of seeing how Tekion’s tech compared with its more established rivals: “It was like comparing a flip phone to an iPhone.”
Unsurprisingly, McNeill, who worked at Tesla with Vijayan, also sings the company’s praises, noting that Tekion even bought a dealership in Gilroy, Calif., to use as a kind of lab while it was building its technology from scratch.
It’s nice, such acclaim, but more important is that Tekion is also attracting the attention of dealers. Though Vijayan declines to share how many customers have bought its cloud software — which connects dealers with both manufacturers and car buyers and is powered by machine learning algorithms — he says it’s already being used across 28 states.
One of these dealerships is the national chain Serra Automotive, whose founder, Joseph Serra, is now an investor in Tekion.
Another is that Volkswagen dealership in San Jose, where Castelino — who doesn’t have a financial interest in Tekion — speaks enthusiastically about the time and expenses his team is saving because of Tekion’s platform.
For example, he says customers need only log-in now to flag a particular issue. After that, with the help of an RFID tag, Stevens Creek knows exactly when that customer pulls into the dealership and what kind of help they need, making their arrival far more seamless.
Tekion can also make recommendations based on a car’s history. It might, for instance, suggest a brake fluid flush to a customer without an advisor having to look through that customer’s history, Castelino says.
As crucially, he says, the dealership has been able to cut ties with a lot of other software vendors, while also making more productive use of its time. Says Castelino, “As soon as a [repair order] is live, it’s in a dispatcher’s hand and a technician can grab the car.” It’s like that with every step, he insists. “You’re saving 15 minutes again and again, and suddenly, you have three hours where your intake can be higher.”
With converts like Castelino, it’s easy to image Tekion making serious strides in market share. And yet it does have rivals, some of which have long contracts in place with their customers.
Even steeper competition, should it come, might eventually be from Tesla itself.
In a Tesla earnings call earlier today, Musk told analysts that there are essentially a dozen startups housed inside of Tesla, including one centered on vehicle service. It’s the very business that Vijayan helped to create.
As for whether Musk might spin out any of these, he said Tesla currently has no plans to do so. He suggested it has enough on its plate for the time being. If Tekion takes off, however, that could well change.
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