Auto Por­tals Take the Turn to Used Cars

Strug­gling on­line auto clas­si­fieds bet on used car busi­ness to in­crease rev­enues

The Economic Times - - Disruption: Startups & Tech - Supraja.Srinivasan @times­group.com

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

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