Amidst all the slowdown in the venture funding scenario in India, there is one particular category which seems to be doing fairly well - Auto Portals. In the background of the 'The great Indian digital disruption', the sale of automobiles in India has been undergoing the transformation, moving beyond mere reviews and news. The business models of these online auto portals are evolving every day with new dishes being put on the consumer's platter. It's become more of a survival saga in reality, despite the segment being very small in comparison to the other countries.
No more a market for lemons - Used cars
Its opportunity in the low trust and asymmetric market. Today before approaching a dealer, every second car buyer does its homework online, reason- comparative tools and easy access to holistic information, acting as an escrow between the two parties. "There are 1.3 used vehicles sold for every new one in India and it will increase to 2:1 by next year. This shows how big the opportunity lies ahead in the sale of used cars", says Sandeep Aggarwal, Founder Droom.
But how is this information gap being bridged? These portals have designed a varied number of soft-wares and products for both buyers and sellers. Droom launched Eco, a way of inspecting a vehicle, giving an Eco report which could be accessed by the transaction, for the buyer to avoid unpleasant surprises. Similar products include orange book value which is an algorithm price engine. CarDekho has a Trustmark certification and warranty to ensure that buyers can purchase a car with complete peace of mind and has inspected over 2 lakh plus vehicles till now.
"If a customer goes to a dealer to buy a used car and requires information, she just needs to click a picture of the license plate and our certification and price will reflect on her phone. It is called 'Know Your Car Better'," informs Vinay Sanghi, Founder Cartrade.com, who cashes on the benefit of a huge dealership network that Cartrade has built, to cater the customer.
Solving the financial woes is where the next round of fortune lies for these portals. Auto finance is a huge opportunity in India especially used car financing, one of the largest untapped consumer finance area in India and we know what a nightmare paperwork could be when it comes to used cars. Online auto portals can change the face of that, says Vinay "Auto finance is a very fragmented market and hence the opportunity. More fragmented, bigger the opportunity".
For Cartrade, at least 70 per cent of new cars are financed, while only 25 per cent used cars are. The numbers for used car finance is low because of the non-availability of finance options and the worries of the financiers in terms of assessment of the car.
"The most important is the hypothecation of the car documents by the bank. We have put together all these services. We tell the bank that we will undertake the hypothecation to your name, will authenticate the condition and the value of the car, would you now finance it? Therefore, now the customers get linked up to 4-5 banks, take the loan and the rest mentioned above is managed by us- documentation, condition and value check".
On a similar track, Cardekho developed deep tech integrations with the banks to enable instant applications which cut down the loan processing time to less than 72 hours as compared to average 10-15 days currently.
Streaming the revenues
What's new when it comes to revenue model apart from the usual listing, advertisement and subscription fee? In an effort to seize the current opportunity and also to incentivize customers to come online to buy and sell old cars, the portals are offering a whole gamut of services including facilitating car loans, getting insurance, ensuring professional assessment of vehicles, as well as refurbishing the old vehicle with authorized parts, among other things for which some of the services might come free but the others are categorised and shifted in the premium packaging and charged.
"Market has dramatically changed over time. Earlier, the online platforms had only two types of offerings- classifieds and content creation, but now we offer much more than that" says Sandeep.
On a fund raising, spree-what is bringing all the investors?
Cardekho which is valued at $300 million, boasts of investors such as Ratan Tata, Times Internet, Sequoia Capital, Hillhouse Capital, Tybourne Capital and HDFC Bank. Clearly, it has no dearth of investors or money. With the increasing population of cars in use, there is potential for the used car market to double in size (in the next few years). New cars industry is growing at the rate of 8-9 per cent and the used-automobile industry is growing at the rate of 15 per cent," says Sandeep, explaining the rush among entrepreneurs as well as investors to ride the sector. From acting as lead generators, having limited contact over execution and closure of the purchasing transaction, these portals today have worked on a full stack model which has won the investor's confidence as they help buyers/sellers in the end to end transactions, including discovery, curation, consultation and post sales service. It's the full stack model that is aggregating the trust of the investors in this business.
On a consolidation mode- Merging for a smooth ride?
Consolidation is a natural evolution of any sector. At one side of the frame, we have players like OLX, Quikr trying to compete in the horizontal online space, on the other side we have been witnessing these online vertical auto portals who have been in the news not just as investors favourite but also in a strong consolidation mode. Cardekho expanded with its key buyouts like Zigwheels and Gaadi.com with its rival Cartrade announcing its major merger with Carwale. These slew of merger activities picked up very strongly. Reason? Experts say that these classifieds used to be overcrowded and not very big at the same time. M&A helped them in aggregating the traffic and scale fast, underlying new technology, reach and efficiency.
"Cartrade started in 2010 and Carwale was in operation before that since 2006 and we competed with each other in both used and new car classified. The whole idea of the merger was that you give one company with leadership in both new and used. Post merger we managed to achieve that", says Vinay , who boosts of 15 million unique customers per month as a combined entity now, giving it a high edge in terms of people listing.
Similar was the voicing of Amit Jain post-merger who claims how Gaadi had a dominance in pre-owned cars and Zigwheels strong content play, helping them scale fast in the pre-owned segment and engage more closely with the audience by leveraging rich content. Of course, it wouldn't be wrong to say how the demand is aggregated, weeding out competition and fragmentation.
These portals might be driving on the 'highway to success', but sustainability and newer methods of customer engagement, syncing in the knowledge with smart technology are vital for their survival.
BW Reporters
Naina Sood is a Economics graduate and has done her post graduation in International economics and Trade. She has deep interests in Indian economy and reforms
