Vikram Chopra had just returned to India after dropping out of the famed Wharton School of Business — having listened to what he calls his “inner calling”. One day, while chatting with Gajendra Jangid, his friend from IIT, he chanced upon a lucrative opportunity for a new venture — deploying technology in India’s second-hand car market. Jangid, who graduated from IIT-Bombay, had a well-paying job at Schlumberger—which even took him to the U.S. However, his cushy job lacked a sense of fulfilment. The two joined hands in 2015 for Cars24, now India’s largest used-car market place with a 5% share.
Cars24 achieved the unicorn status in November 2020. In December 2021, it closed a funding round of $400 million, taking the valuation to $3.3 billion.
Cars24 is a departure from a classifieds platform—being both in the consumer-to-business (C2B) and consumer-to-consumer (C2C) segments — and facilitates end-to-end transactions between buyers and sellers. It charges a 4-5% commission for every deal. It reported operating revenue of $371.3 million in FY21. More than 20% of its revenue comes from international markets (Cars24 has a presence in West Asia, Australia and Southeast Asia). “The overseas business was launched in the post-Covid world while all of us were working remotely. We have a technology led playbook to win every market we enter. Additionally, we are building everything from scratch to make sure we deliver a seven-star customer experience,” says Chopra. The company is vying for $2 billion in revenues by FY23, and a 20% share in the domestic market for used cars in the next five years.
In India, it currently has 205 branches across 182 cities. The company considers its USP in the Mega Refurbishment Labs (MRLs) — large-scale refurbishment facilities of over 1 lakh square feet—across seven cities, including Hyderabad, Pune, Bengaluru, Chennai, Gurugram, Mumbai and Ahmedabad. It has invested $10 million in these facilities, and will use the recently raised funds to scale the labs. The duo claims the company is making money at unit economics level—a car is the second-most expensive purchase after a house, Thus, the margins are reportedly higher than any other product. “In the case of pre-owned cars, each car is an SKU in itself, indicating each car is unique and hence, the turnaround time on the cars we buy and the expense involved in refurbishing varies from car to car,” add Chopra and Jangid. The company also has a financing vertical. “In India, we’re financing close to 60% of the cars we sell,” says Jangid. If a customer is dissatisfied with the car, he can return it within seven days.
The company has ploughed through many challenges, including demonetisation, GST roll-out (initially there was no clarity on the GST rate for pre-owned cars), announcement of BS-VI and, finally, Covid.
Looking ahead, it wants to accelerate car ownership in India. “We believe that in the next 10-15 years, car ownership will be driven by pre-owned cars,” says Chopra. “We are where Flipkart was 15 years ago, and Amazon was 25 years ago,” he adds. — Rishi Kant