NEXUS Automotive CEO: Innovation is in the blood of Israelis

“I have to say Covid has not been a roadblock for us,” said the founding partner and CEO of NEXUS Automotive International Gael Escribe. “Following the Second World War we saw in a number of countries 30 years of fast growth. I think that we are probably here in a transformation process that will equip the economy with all kinds of new companies that did not exist five to ten years ago,” he told CTech in a video interview from Paris.

Escribe, heads the self-described “growth accelerator for progressive companies in the automotive industry,” which was founded seven years ago but has already brought a big change. “We operate in the automotive industry, what we call the automotive aftermarket, which is everything that enables cars to remain on the road once you have purchased your car. It is an enormous industry, but also an extremely fragmented one and not well known publicly. For years it has been driven by individual families and not corporations,” Escribe explained.

The NEXUS group includes about 2,000 companies worth over $35 billion. “This industry is consolidating and aligning with the big trends like sustainability, and at the same time it is an industry that acquires a lot of innovation, trying to migrate from a traditional automotive aftermarket - buying parts and providing services to keep your car on the road - to an industry that will be a key driver of what we call the mobility industry and the automotive aftermarket, becoming this driver of the mobility industry to become more of a service provider.”

Escribe’s statement regarding the pandemic and the past year-and-a-half is backed with some strong numbers displayed by the automotive aftermarket. A June report from market research group NPD points to growth during Covid, reading “despite having a negative impact on miles driven, the pandemic led to automotive aftermarket consumers taking on car care projects themselves, which is paying dividends to the industry this year. The automotive aftermarket grew by 18% from January through May of 2021.” Furthermore, it stated that “aftermarket sales revenue nearly doubled in the first five months of 2021 and was presaged by sales gains of 43% online and 7% in-store last year.”

The growth in the automobile aftermarket sector should not come as a surprise when considering how it dealt with past crises. As a May 2020 report from McKinsey stated, “to appreciate the aftermarket’s resilience, consider the financial crisis from 2007 to 2009. The United States saw GDP drop about 4% and the economic repercussions hit automotive purchases hard. Sales plunged 42% for new cars and 20% for used cars, but the aftermarket experienced only a 1% decline.”

Capitalizing on the Startup Nation

Nexus’ focus on innovation and the industry transition brought it to look for solutions in the Startup Nation. “We have firmly decided three years ago that Israel will be the right place to conduct this migration in an enormous industry,” he said. That move brought the group to co-create Mobilion, an early stage, Tel Aviv-based venture capital fund that focuses on mobility and automotive sectors.

“To manage this transition our board of directors decided to identify startups through Mobilion and to capitalize on the Startup Nation,” Escribe explained. “When you are a traditional industry that has to migrate, either you equip yourself with people that bring innovation which we have done as well, but to accelerate this process you participate in the creation of an initiative like Mobilion with other partners and you leverage the innovation that comes in. So Mobilion has already made six investments, which are being leveraged by the Nexus community.”

“When we started the concept of what Mobilion should be, we did so in partnership with Nexus in order to bring a new concept of investments into this scope of mobility investments, and leveraging the benefits and the powers of the two, Nexus and Mobilion,” said Avi Feldman, co-founder and managing partner of Mobilion Ventures. “So we created a kind of unique platform that leverages our investment capabilities and the market outreach.”

“Most of the technologies and most of the VCs that are playing within the mobility sector are pushing technology that will eventually be embedded into OEMs (original equipment manufacturer) as manufacturers of the vehicles,” Feldman continued. “The power of coupling Mobilion and Nexus is to focus on the aftermarket so reaching the customers, drivers, and users directly through those unique channels. By that you are able to bring the technology directly to the users and without the need to go through the OEMs and this is a very unique way of looking at technologies.”

“I think the best example is Mobileye. Its first years as a technology provider were through the aftermarkets, selling those kits you could install. Only at a later stage did they become integrated into the vehicles. And this is exactly what we are offering. Our coupling is allowing us to take any existing mobility startup and offer them a faster track to commercialization and a faster track to play in the market,” Feldman concluded. “I am not in a position, even with $35 billion, to screen 200 companies a year. We are not technicians, so this is something we mandated Mobilion to do for us with leaders like Avi who are professionals of the startup ecosystem,” Escribe added.

Impressed by rigor

Both Feldman, a veteran of the Israeli ecosystem who worked for both the private and the public sectors, and Escribe hail the potential within the small country, but also recognize the challenges. “Within a few years, less than a decade, Israel became the third largest innovation hub in mobility,” Feldman said. ”If Israel wants to maintain that position, we need to give the companies very good infrastructure in terms of legislation and regulation, the ability to play here, we need to give them the ability to grow.”

“I am extremely impressed by the innovative fiber of all the people I have met, really it is not superficial, innovation is in your blood,” Escribe described his encounters with Israelis. “I am impressed as well by the rigor that is being applied to innovation. Innovation is nice to have but if it goes in 360 degrees and not channeled at the right way it does not mean anything and what we see in Mobilion is a very rigorous approach to channel innovation in the right direction and this puts an investor in a comfort zone that is extremely assuring.”

Down the road

Aside from consolidation and ownership transformation, Escribe is keeping an open eye on other factors and technologies within the sector, anticipating where the next big thing will come from. “Everybody is watching the digital transformation, and this is something extremely applicable to our industry. We have seen flourishing ecommerce players in the automotive aftermarket in both parts and services,” he said. “The digital transformation is a very important driver for the future, and we will be looking at that, and we made an investment with Mobilion in that direction.”

“Israel excels in digitalization of sectors,” Feldman continued. “So Israel has a lot to offer to the global markets in regard to the digitalization Gael just mentioned.” Feldman also discussed electrification as an aspect of the industry Israel excels at, stating its share of the market “is above and beyond” compared to its size. “If you are talking about new batteries, we have some very good companies. If you are talking about electrification, the way you transfer electricity to the vehicle, Israel has something unique, and that needs to be leveraged, and will not be done without government assistance.”