The Resale Value of the Cars in Cars24 Startup

Incorporated in 2015 by FabFurnish founders Vikram Chopra and Mehul Agrawal, the idea behind the startup was to aim at creating a market out of the sale of used cars in India. They have grown quit wonderfully to have spread across 10 major cities and having set up over 50 offices pan India. The idea behind the business was unique and needed a lot of planning and execution as one wrong move might have closed the doors for them like most of the startups. With growing population and growing economic status, another thing that has grown in India is the automobile industry and proportionately have grown the number of cars. 

Like most products, the resale value of the cars was not fixed and could not really be determined accurately. And that is what cars24.com had set out to achieve. And with the annual revenue of the company estimated at 2 million USD, one would say that they are moving in the right direction. Cars24 follows a B2C model but it has also been working to get into the C2C structure which would open newer avenues for the company and also boost its growth plans. What it will also result in is that it will bring the company in a stronger position in comparison to its competitors in the Indian market who have been actively trying to gain control of the market. Also, recently, on 7th June they successfully raised 50 million USD of investment to boost their strategies for the upcoming years, which amounts to 340 crore INR.

Cars24.com is an interesting startup which is making car selling a hassle free and easy experience for customers. Cars24.com is an automotive online e-commerce retail category firm. From getting an instant quote to completing the entire process within 30 minutes (as they claim), car selling has never been this easy for Indian car users. Cars24 basically earns a spread between it’s purchase and sale prices (it sells the car further to Dealers, Owners, OEMs etc. 

When it comes to selling or buying a car we are exposed to so many difficulties be it reaching a prospective seller or buyer. From not knowing the real market value of the car to not trusting the reliability of the seller of the used car the issues never end. When you list your car online you know that in the later days to come you’re going to spend your entire time in attending calls and answering mails. The business of used car is a $20-billion market in India. Every year it’s growing at 25% year on year. In terms of absolute numbers 30-35 lakh used cars are sold every year but only 20 lakh new cars are bought every year. 

The market is expanding and the opportunity shall be availed. The customer demand is very strong but the lesser supply was the bottleneck. When Vikram Chopra and Mehul Aggarwal began with this venture of theirs after Fab Furnish which was sold to Kishore Biyani’s Future Group, Chopra said tracking employee satisfaction is an undervalued aspect when it comes to most Indian startups but it’s a crucial component of being a good entrepreneur. Return on Investment,Growth Margins and customer satisfaction are the standard criterias that are expected to be tracked while building a profitable venture.

An Engineer from IIT Bombay Vikram Chopra and Mehul Aggarwal had already realized when they worked together building Fabfurnish that investors not only put a bet on business but on the entrepreneurs as well. Selling and buying used cars is an highly unorganized market in India so Vikram Chopra and Mehul Aggarwal decided that they will organize the supply side of things by arranging for the sellers of the used cars. The cars will be demonstrated, given a rating, accessed for the current market value and then put on sale. Most markets are often organized through demand. E-commerce is also organized through demand and not supply but for this we thought of organising the market through supply. After their not-such-a-great time at Fab Furnish both of them decided to work differently for this.

When they came to the market the situation wasn’t that they are the beginners there were already established organizations in the market such as Droom, Quikr, Carwale, Autoportal, Carnation and Olx but all of these are only lead generation websites and help from them exists only virtually and not on a face-to-face medium. They act just a medium for the transaction to take place but Cars24.com owns the transaction.

Firstly we are asked for certain details on the website and then they give an estimation of the car’s value. Then we are given an appointment to visit their centre. On the day of visit they check the car condition and takes images of the car. Then their business partners get this information on an application where they bid. The highest bid wins and you are informed about the final price of your car. If the seller agrees for the price offered one takes home the money. Infact they even offer a free cab ride home after the sale. Cars24 does not charge any 'fees' to the Seller but still there are 2 intermediaries between the Buyer and Seller - Cars24 itself and their listed partner. Hence, the seller will end up paying for their 'cuts' and will get lesser value for his/her vehicle.

Cars24 says that the evaluation based on an algorithm but they provide no details on what the algorithm is, what factors it takes in and how it works. It may not be good for them to make this info public but for a seller to believe the market value quoted by them (when they have second hand car dealers as their listed partners) is a bit dicey.Their channel partners are dealers who purchase the cars on the basis of the inspection report overhaul it and they then sale it to the customer. With their channel partners they deal on a monthly basis and not on transactional basis.

Speaking of their latest investment bagging, it was raised from Sequoia Capital India and two of the existing investors of the company Kingsway FCI Fund and KCK Global. A few months ago, a similar amount was invested in the company by global investors including the Russian billionaire Yuri Milner's Apolletto Asia and Venture Highway, which have invested in similar projects earlier too. 

The performance of the company in the FY2017 was commendable with the sales figure standing at around 417 crores. The recorded losses were worth 76.3 crores. The numbers might not reflect as a big company figures but these are good numbers for a startup and that too in a market which hasn't been yet understood properly. Indian used car market is huge and has immense potential and within some time as the competitors get a hack of it, the numbers will certainly boom.