India’s Pre-owned Car Market to Touch $100B by 2022: CARS24
India’s used car market is currently worth $20 billion and is poised to grow fivefold to $100 billion in the next five years.
CARS24, which is in the business of buying used cars through a detailed inspection process and live online auction using latest technology, is aiming to corner a 10% marketshare of the pre-owned car market in the country by 2022. Talking exclusively with BW Businessworld, Vikram Chopra, its Co-Founder and Chief Executive Officer, affirmed that India’s used car market is currently worth $20 billion and is poised to grow fivefold to $100 billion in the next five years. Below are the edited excerpts:
Please can you tell us the genesis of your company?
I have been in the technology and internet business for seven to eight years when I was with FabFurnish (as its Founder). After divesting my stake with that start-up, we floated this entity (CARS24) in 2015. Essentially, we were fascinated by a lot of categories which were large but unorganized. Most start-ups (like Flipkart) often think about organizing a market through demand but we thought of organizing the market through supply. India’s used car market, which is 50% bigger than new car sales, stands at 4 million units per annum. These numbers, when multiplied by the average per unit price of the product (used car), translates to roughly Rs. 150,000 crore (US$ 20 billion). However, connecting supply to demand is a complicated process given that the market is highly unorganized. Even though there is enough consumer demand, the supply bottlenecks are aplenty. So we sensed an opportunity in this space wherein consumers can leverage on our technology to resolve their pain points. We realized if we could streamline the supply side of things, we could organize this entire category.
How different is your business model from other e-commerce players which are dealing with pre-owned vehicles?
If a car owner is planning to sell a car, he will be typically reaching out to seven or eight or even more people. He will not be knowing who will actually buy a car or what will different people say (about his car). The only way to discover the best price is to talk to a lot of people which is quite time consuming. So we have cut down the whole process of selling a car involving 4-6 weeks to only a couple of hours now. We buy all kinds of cars, whether it is moving or not, is a tier-2 or 3 registered vehicle, has a loan on it, is a premium car or a lower end car. Moreover, the money is transferred to your account instantly. No one offers a service where you can sell your car in one visit in a matter of couple of hours as all the paperwork is taken care of by us. This is the innovation we have brought in to help consumers sell the car. The reason we are able to offer this unique service is because it is laced in technology. We have thousands of buyers who are logged onto our proprietary app and his details get registered with us. We run real time auctions wherein the end customers are able to view the images and other details of the car. We have bought the car on behalf of someone else who has quoted the highest price of the product. So we buy the car only once it is confirmed by any buyer.
Who are your target customers whom you eventually sell the used cars? And how do you stand to benefit if you are selling it without charging any commission?
We have around 10,000 buyers who are running entities such as used car showrooms, fleet running firms, corporates, etc. and transact with us on a monthly basis. Every month they buy a lot of cars from us. They pay us the subscription fees for availing our services. Furthermore, we also provide them various value added services like car inspection, vehicle guarantee, working capital, parking services, loans, logistics, etc., from which we make money.
How many users are registered on your platform and how many transactions are executed on a monthly basis?
Since we commenced operations, we have done over 35,000 transactions till date. The average buying price of the product will be Rs. 2 to 3 lakh depending on the state or the city it is registered with. So the GMV of the total transactions until now would be US$ 1 billion.
What is the average holding period of an Indian car owner? Will it be the same going forward?
In India, the average holding period used to be 7-8 years at some point of time. It is now 3-4 years which is a worldwide trend. In select pockets, it is even two years. I think it will come down further to 3 years in the future.
Do you have any plans to diversify into other automotive segments like two-wheelers or commercial vehicles?
Right now, our focus is solely on passenger vehicles comprising all segments and brands. The market is so huge and untapped that it makes more sense for us to remain focussed on private car owners. We are open to explore other segments like bikes where the pain points are similar. We can extend the same model to commercial car owners. Although we have thought about it, we have not yet put anything concrete on the table to make it a part of our plans.
What are your long term revenue projections?
We don’t give long term projections. From a vision perspective, India’s used car market, is currently valued at $20 billion and is growing every year at a 10-15% CAGR. In five years’ time, it will be worth $100 billion. Even if we corner a 10% marketshare by executing 10 lakh transactions a year, our company can clock $10 billion by 2022.
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