The latest company to be valued at over $1 billion comes from the automotive space. CARS24, a five-year-old company which also has a licensed NBFC in-house, recently raised $200 million in a Series E round led by DST Global. CARS24 will use the capital to reinforce its tech backbone, scale up on branding, and enhance new business verticals that include new segments such as customer financing, and two-wheelers. Vikram Chopra, the company's co-founder and CEO—who had started the firm with Mehul Agrawal, Ruchit Agarwal, and Gajendra Jangid—tells Fortune India that the trick lies in understanding how to value cars. Edited excerpts:
Have you reached the sort of scale you think will give you a national business footprint?
We are transacting $50 million in cars monthly or $600 million a year, and they are all used. What we offer is a way for anyone to buy or sell second-hand cars. Our differentiator lies in leveraging tech far superior and which depends on proprietary algorithms to figure out documentation, pricing, and condition and then value. It's worth noting that we are a transaction platform not a classifieds platform... we sell around 15,000 cars a month.
With that many cars in sales each month you must have to rotate inventory fast and turn sales equally fast. What's the formula?
Cars are solid collateral. Over the last five years, we raised $400 million of which $200 million is in the current round led by DST alongside existing investors. Post [this], our valuation is a little over a billion, and at the last round 18 months ago it was $500 million. Other investors have included the likes of Sequoia Capital India, Exor Seeds (the venture arm of Exor, controlled by the Agnelli family), London-based Kingsway Capital, London-based Unbound, Moore Strategic Ventures from New York, and KCK Global. The trade is split between buying and selling and on a unit economics level; we make money on a contribution level which means we make money on the car but at an Ebitda level are losing some money. We have to invest in technology and data science and separate lemons from the worthy cars and our proprietary pricing engine works for us.
How are you going to deploy the funds raised?
From a market share perspective, that is at just 4% for used cars; we have to expand that and the second use is to scale our presence in new categories, for example two-wheelers, consumer financing for both cars and bikes, reconditioning, and refurbishment.
Many have tried their hand at the used car game and not gotten very far. What makes you think you would succeed?
There are two or three things that are hard to do. How do you assess the value of a car? Most do it through humans. We do it with technology. And the other, as we said, is going from single to double digits in market share. A few years from now, we would want to be a one-stop-shop: finance, buy, and sell cars and two-wheelers.
So, where do you keep all your cars and will you ever do new cars?
Maybe that’s a great idea for our long-term road map. Because we are online, our cars are delivered from warehouses to buyers. We have at least one each in the 130 cities we are in.
How has business moved in the past nine months? What do customers want?
The demand for used cars after the lockdown saw business crash to zero. We thought that cars will not come back for two years but now traffic is up by four times on our website and we are seeing early signals around the used car market which leads us to believe it is on a tear. These are still early days and we are very hopeful.