Auto Portals Take the Turn to Used Cars
Struggling online auto classifieds bet on used car business to increase revenues
Mumbai: Major auto classifieds portals CarTrade, CarWale and CarDekho are betting big on used car business and financing of such cars as they expect this vertical to be their future growth engine even as they battle mounting losses.
CarTrade, which also owns CarWale, and CarDekho, which also owns Gaadi.com and ZigWheels.com, both plan to go public by 2019-2020, senior company officials said.
“The new big business that we are focussing on is the financing for used cars in FY18,” said Vinay Sanghi, CEO of CarTrade. The company launched auto finance as a service in October in partnership with banks and NBFCs to document and evaluate used cars to enable loans. “Auto finance will form 25% of our business by FY18,” Sanghi said.
CarDekho is also busy building its used car business. “The new car business is our cash cow, where we are already profitable. But the growth engine for the future is used cars,” said Amit Jain, cofounder at CarDekho. “I am investing in this business and I’m bleeding,” he told ET.
The firm is also looking to build competencies in evaluation and financing for used cars.
Jain expects the used car business to grow almost 90% in the coming year even as the company gears up for an aggressive marketing campaign for the vertical despite rising losses.
Girnar Software, which owns and operates CarDekho and its subsidiaries, saw its losses swell more than three times year-on-year at .₹ 144 crore in FY16. The company posted operational revenues of .₹ 82.4 crore, 75% more than FY15.
CarTrade and CarWale, too, saw their losses almost double year-onyear in 2015-16 at .₹ 147.65 crore and .₹ 90.8 crore, respectively.
MXC Solutions India, which operates CarTrade, posted consolidated operating revenues at .₹ 32.27 crore for FY16 while CarWale, which was acquired by CarTrade in January 2016, posted revenues of .₹ 35.6 crore.
One of the core reasons for ballooning losses at all these firms is high marketing and advertising expenses.
CarDekho incurred advertising expenses to the tune of .₹ 62 crore last fiscal year while CarTrade and CarWale together saw advertising and promotional expenses touch almost .₹ 161 crore.
High advertising costs are hitting newer players too, some of them spending three times that of revenues. Droom spent .₹ 20.6 crore for advertising and marketing alone even as the three-year-old company managed to clock merely .₹ 4.7 crore in operational revenues in FY16.
CarDekho, which counts CapitalG (Google Capital), Hillhouse Capital, Tybourne and Sequoia India among its investors, will get into the market for one final round of funding before its IPO in 2020. The company has raised about $75 million so far.
VINAYSANGHI CEO, CarTrade The new car business is our cash cow... the growth engine for the future is used cars