Since When Did Users Cars Become a Booming Business? | TechTree.com

Since When Did Users Cars Become a Booming Business?

At a time when car sales are plunging globally, how can start-ups make money selling used cars and bikes

 

The rate at which start-ups offering platforms for used car and bike sales are getting funded, it wouldn’t be surprising before our friendly neighbourhood car garage owner starts his own website to offer buying and selling options to his regular customers.

 

Look at the number of such start-ups that have mushroomed in the recent past? We have Cars24 and CarDekho, both funded by Sequoia Capital and Droom that raised a whopping 130 million dollars besides the egregious OLX that has been buying and selling anything and everything that one can think of.

And if you thought that there’s already an overkill in the online automobile marketplace, you’re wrong, for into this already crowded space comes Spinny, which managed to bag 47.3 million dollars of cash from a group led by Fundamentum Partnership, the growth fund supported by none other than Infosys veteran Nandan Nilekani.

This four-year-old start-up is doing pretty much what the others are with a few small tweaks here and there. For starters, they claim to offer an inspection mechanism for buyers of second-hand cars. But isn’t that what Maruti has been doing with its True Value brand and Mahindra and others have done in the past?

Spinny, which received the funds as part of its Series-B round, is hoping to use the money for expanding its online platform to more cities. The founders believe that a hassle-free process combined with oodles of trust is what customers seek and what the company can provide to those seeking to buy pre-owned vehicles – an euphemism for second-hand cars.

This comes close on the heels of Cars24 closing a Series D investment of 100 million dollars from a group that includes Unbound, the London-based investment company founded by Bharti Airtel scion Shravin Mittal. The company is valued at 550 million today though a casual visit to any of its offices suggest anything but hectic activity.

This author went to one such platform some months ago and the experience was far from happy one as the initial paperwork and the subsequent negotiations were as good as one gets when a local car dealer comes home after hearing about your decision to sell the car from a common mechanic associate.

In fact, most of these start-ups appear to be pitching to customers that they should be buying used cars. Take a look at what Spinny has to say on their website. As for others like Cars24, they seem to busy selling healthier life through their Walkathons and other initiatives. That being the case, why push for fossil-fuelled vehicles, that too old cars that spew more venom?

Just like Spinny, even Cars24 sought the extra cash to expand their network into smaller cities and towns. A laudable dream whose time may not have come yet as the trust factor that the Spinny founders speak about in most of their media interactions needs to get built over a longer period of time through word-of-mouth. Boman Irani alone cannot do the trick.

A report in the Economic Times claimed that Cars24 reports 13,000 transactions a month with an average ticket size of Rs.3.5 lakh in the used-car market which is estimated to be worth around 25-30 billion dollars annually. Some of these numbers appear far-fetched as monthly new car sales figures in January 2020 was just 45,242 units.

Even if we believe the numbers, what appears to be beyond comprehension is how these five companies, and possibly a few more that get added to this crowd, hope to differentiate themselves in the market? All of them claim that they offer seamless service. Inspection is indeed a value add, but so long as there is no certification or warranty, what is it worth?

In fact, Nandan Nilekani was quoted by TechCrunch.com after the Spinny funding as saying that the company  offered “full-stack business” and that it fits into his fund’s theme of backing long-term oriented entrepreneurs to solve complex business problems using technology and who aspire to build a company at scale and to last.”

When the global auto industry is showing declining cues and most big cities are choked with traffic leading the youth to prefer ride-sharing over vehicle owning, one finds it tough wrap one’s head around the thought that used car sales is booming and those who offer a platform to support it are solving complex problems over a long-term.

Looks like good money continues to chase bad business, as it has done for most of human history!


TAGS: Cars, spinny, cardekho, Cars24, Nandan Nilekani, Sequoia

 
News Corner
IMP IMP IMP
##