SoftBank-backed Cars24 eyes small towns to sell used cars in India

The company more than doubled its India revenue in 2022 to Rs 6,008 crore from Rs 2,776 crore in 2021

Cars24, an e-commerce platform for pre-owned vehicles, has set a target to reach 1,000 cities in a few years as the pandemic has accelerated the shift to buying used cars in India.

The SoftBank-backed firm is planning to scale up its services in smaller cities and towns, where it is seeing an increasing demand for its pre-owned vehicles.

“If you want to catch the lion's share of the used-car market and be present in Bharat, it is a must to (tap) these smaller cities and towns,” said Gajendra Jangid, co-founder and chief marketing officer of Cars24, in an interview. “Right now we are making a game plan to scale up and be present across India.”

The used-car market in India is valued at $23 billion in FY22 and is seen growing at a compounded annual growth rate (CAGR) of 19.5 per cent till FY27, according to a report by the Indian Bluebook (IBB) and Das WeltAuto. It said the demand in smaller towns is expected to grow at a 30 per cent CAGR by 2026, compared to a 10 per cent CAGR in the top 40 cities.

Gurugram-based Cars24 is now present in about 100 cities. It expanded to more than 24 cities in 2022, including Tier-2 and beyond locations. The top Tier-2 cities driving its growth include Jaipur, Kochi, Lucknow, Surat and Chandigarh.

During the pandemic, the firm saw consumer demand shifting from offline to online mode completely. Even after the pandemic, customers prefer services delivered to them at their doorstep. As a result, this year its business shifted from 90 per cent branch or store-led to 90 per cent home inspection-led.

The demand for vehicles during the pandemic helped Cars24 double its revenue in 2022. It now stands at Rs 6,008 crore for its India business from Rs 2,776 crore in 2021, according to the 2021-22 financial results filed by Cars24 with the Registrar of Companies. Net loss has widened to Rs 248.07 crore in FY22, from Rs 191.54 crore in FY21. It reported an 87 per cent year-on-year rise in revenue from operations to Rs 5,136.53 crore.

“The last two years have been a rollercoaster ride for us,” said Jangid. “We were all trying to forecast how the entire economy will bounce back and the impact on the new or used car category. But we decided to make long-term decisions and not do anything that helps us in the short run.”

The company raised a $400 million funding round which included debt in December 2021. It was led by existing investor Alpha Wave Global at a $3.3 billion valuation. At a time Cars24 is scaling up in small towns, it has reduced the cash-burn rate by 50 per cent in FY2022. It has paused its plans for international expansion.

The company is only focusing on India and other existing markets such as Southeast Asia, the Middle East and Australia. In May this year, the firm said around 600 employees have been let go based on their poor performance and not owing to any "cost cuts".

“While keeping long-term (goal) in mind, we also want to make sure we reach Ebitda positive soon,” said Jangid.

Cars24 sold around 10,000 cars to consumers during the festive season between September-November in 2022. Jangid said owning a car post-pandemic has become a fundamental need.

An estimated over 3.5 million used cars were sold in India in FY22, breaking the previous year's record while 40 million-plus cars were sold globally around the same time, as per the IBB report. By FY27, India's used car market is expected to touch sales of up to 8 million units, which is projected to grow at double the rate, at a CAGR of 19.5 per cent till FY27.

Cars24 competes with players such as Droom, CarDekho, CarTrade and Spinny which are also betting big on this market. It is implementing various strategies to tap the used cars market opportunity post-pandemic. This includes providing end-to-end solutions to support car buyers and sellers. The in-house scalable tech infrastructure helps it cater to customers across India whether online or at the store offline.

The firm has invested heavily in building its tech capabilities. It has also launched Mega Refurbishment Labs (MRLs) in 7 metro cities which are the largest car service and repair centres in India.

Another strategy for the firm is financing. Car24 disbursed pre-owned car loans worth over Rs 1,000 crore in the last three years of operations while achieving net profitability in this segment. It aims at another Rs 1,000 crore loan disbursal to customers in the next one year.

Cars24 was founded in 2015 by Vikram Chopra, Mehul Agrawal, Ruchit Agarwal and Gajendra Jangid. It became a unicorn in 2020 in a $200 million funding round led by DST Global.