CARS24’s sales and website engagement have surpassed pre-pandemic levels, as used cars see a renaissance amid the need to reduce COVID-19 infection risks.
Online used cars marketplace CARS24 has raised over US$200 million in its Series E round of financing led by DST Global, the startup announced in a blog post yesterday. With the current fundraise, the valuation of CARS24 shot past the $1 billion mark, making it India’s latest startup to join the Unicorn Club.
The fresh capital injection doubled the total funds raised by the startup since its inception five years ago. And, it also doubled the startup’s $500 million valuation in October last year when it raised $100 million in its Series D round.
The funding round also saw participation from existing backers Exor Seeds, Moore Strategic Ventures and Unbound, the blog post stated. The startup’s financing arm, which offers loans to consumers, raised debt funding of a little over $1 million in July this year.
The latest capital infusion will be utilized towards technology and product innovation, and scaling new business verticals, the blog post noted.
CARS24 Co-founder and CEO Vikram Chopra said, “With this investment, we will continue to innovate our product and bolster our capabilities to provide the best experience for all parties – with sellers getting the best value for their car [and] buyers getting to choose from a wide assortment of automobiles.”
CARS24’s Startup Journey
Headquartered in Gurugram, CARS24 was launched in 2015. The startup was inspired by Chopra’s ordeal in trying to sell his used Hyundai Accent before a temporary move to the U.S., he told Bloomberg Quint. Disconcerted by the situation, he gave his car to a friend instead, he added.
Chopra was an investment analyst at Sequoia Capital before he founded FabFurnish, an online furniture and home decor retail startup. Soon after, he sold FabFurnish to Kishore Biyani-led Future Group and founded CARS24. Sequoia Capital is now one of the prominent backers of CARS24.
CARS24 employs technology to ensure an efficient and reliable customer service experience, the blog post noted. The startup’s tech capabilities include a unique vehicle appraisal technology, AI-enabled pricing algorithms that give the accurate market price of a used vehicle, and a scaled infrastructure that ensures seamless execution, it added.
Chopra said, “Traditionally, car selling or buying has been a tiresome process, however, over the last five years, we have strived to transform the customer’s journey- ‘the CARS24 way’ that is hassle-free, safe and transparent.”
Managing Partner at DST Global Rahul Mehta added, “CARS24 has pioneered a significantly differentiated experience for the customer and dealer by deeply leveraging data and technology at each step, resulting in world-class operational efficiency and market leadership in the segment.”
The startup’s online portal allows sellers to get their cars evaluated online and sell it to CARS24. Its primary business model involves buying used cars and selling them to dealerships and other used car portal. Lately, the startup has also started selling directly to consumers through its online portal. CARS24 earns its revenue by taking a cut out of each transaction.
Last year, the startup acquired its Non-Banking Financial Company (NBFC) license to start its financing business. According to the blog post, CARS24 now offers quick and easy loan plans with 2-hour disbursals.
The startup also offers 100% buy back guarantee and zero prepayment charges, according to a Livemint report. As of July, 2020 CARS24 has disbursed loans amounting to over $50 million (INR 400 crore) within one year, the report added.
This year, the startup also ventured into the used two-wheelers category. In less than six months of operations, the company has already transacted over 3,000 two-wheelers, the blog post noted. The two-wheeler segment is experiencing better traction than cars, and the startup plans to foray into servicing next, Chopra told Times of India (TOI).
COVID-19 Created A Boom For CARS24
In the early weeks of the lockdown, the startup’s website generated no revenue. As movements were restricted and people stayed home, the demand for cars had declined drastically.
However, as people began to settle into the new normal and began rethinking their traveling needs in light of the pandemic, the demand for used cars boomed. According to a survey conducted by CARS24 earlier this year, 53% of respondents were likely to buy a car within the next six months.
Among these respondents, 25% used public transportation and cabs before the pandemic. This indicates that people are opting for private vehicles in light of the infection risks in using public transportation – one of the major reasons for car purchases now, according to CARS24 research.
Moreover, the economic downturn and job losses triggered by the pandemic has put budgetary constraints on most families. According to the CARS24 research, 22.5% of consumers who were planning to buy a new car last year would now prefer used cars due to financial limitations.
This swell in demand for used cars increased CARS24 sales figures by 20% compared to pre-lockdown levels, Livemint reported. The startup’s annualized sales is currently at $600 million, compared with about $480 million in February 2020.
The startup’s website engagement has also increased 4X and annual transactions crossed 200,000 units, exceeding pre-COVID levels, the blog post noted.
CARS24 owns around 4% market share in India’s used car space, with 12% market share in New Delhi, Chopra told TOI. The company aims to grow its overall market share in the country to double-digits, he added.
According to a report by TechCircle, the startup’s revenue for FY19 had increased 150%, but its losses had also widened. Like many unicorns around the world, CARS24 is yet to achieve profitability.
With India’s used car segment being highly fragmented, and only a handful of players in the market, CARS24 has tremendous scope for growth. Moreover, the startup’s financing arm also has massive opportunities to capitalize on. This is because used car loan penetration is currently at about 15% and is expected to grow to over $10 billion of annual lending by 2021, from less than $2 billion in 2017.
Header image courtesy of CARS24