Used car market to grow at 10-15% over next 5 yrs: Cars24

Cars24 is propelling change in the pre-owned car ecosystem and setting benchmarks for high quality used cars. Through the convergence of disruptive technology driven state-of-the-art facilities, the company is transforming the pre-owned auto industry and thereby, filling the standardisation and benchmarking gap prevalent in the industry.

The brand also leverages artificial intelligence, machine learning and data science to optimise the refurbishment process. This will make the entire process efficient and effective while eliminating subjectivity. In an exclusive interview, Gajendra Jangid, Co-founder and CMO of Cars24, tells Bizz Buzz about the latest trends of the pre-owned car market in India

The used car market across the globe has been growing at a rapid pace. India is a $25-bn market for used cars and is 1.5 times bigger than the new car market. It is estimated to reach $50 bn by 2025

Over past 6 years, we have identified and solved these various genuine customer pain points and disrupting the market, making us the leader with 90% market share in the organised space and 5% in overall industry

What is the investment made by the company on Hyderabad MRL? How big is the team here? Going forward, are there any plans to increase the headcount?

Hyderabad is one of the booming IT hubs in the country with an ever-growing demand for pre-owned cars. It is a lucrative auto market showing a promising upward mobility trend. To address the issue of lack of quality cars and strengthen our focus in the Telangana market, we launched our Mega Refurbishment Lab (MRL) in Hyderabad last December. Spread over 2.1 acres in Ranga Reddy District of Telangana, the massive facility in Hyderabad can refurbish over 70 cars daily and will provide upwards of 180 auto experts' jobs. It comes with the best-in-class systems, processes, and technology to deliver used cars that feel as good as the new ones.

Certainly, we have top of the art machinery at the facilities to provide the best quality products for our buyers. The used-car market runs on trust and quality of the cars. We have made significant investments to ensure that the best of technology is used at the MRL and the most skilled workers/engineers are present, who refurbish these cars.

When compared to other markets, how Hyderabad is doing at present? Which cars are the fast-selling models? What is the average car ownership period? What is the age group of your customers and how many year-old cars are the most-preferred vehicles?

Hyderabad is one of the most prominent and lucrative markets for Cars24. The ecosystem in the region is effective and well organised, which is why we set up our huge MRL here. The fastest selling body types in Hyderabad have been hatchbacks and SUVs. The most preferred body type is hatchbacks, with 43 per cent willing to buy, followed by SUVs with 26 per cent. Additionally, the demand for petrol engines is also high among buyers. In addition to this, Hyderabad also saw six times growth last year. The average car ownership period is usually 3-4 years. Majority of our buyers are young millennials, while most buyers are young males, there has been an uptake in the number of women car buyers as well.

From an industry average of 10 per cent last year, the number has increased by 50 per cent. It is likely to further amplify in the near future.

After the launch of the Vehicle Scrappage Policy, what are the opportunities you see in the pre-owned car market across India?

The Vehicle Scrappage Policy was a positive move last year. It is a great initiative for the overall industry. Some people have cars that are 10-15 years old, even before this policy came into effect, came to us asking if we could scrap their cars for them. This shows that consumers are actually willing to put off their older cars but they don't know how to do it. Players like us come to their rescue. Once an appointment is fixed, we will pick the cars from the customers' homes, and give them cheques right away.

Do you have specific plans to enhance the life of 15-year old cars and bring them into the resale market? Could you share some of your strategies?

We do not plan on enhancing the life of a 15 year old car due to it being at the end of its life cycle. However, a car is still a dream for many in a country like India. Purchasing a car has always been a matter of pride and an indication of one's social status in the community. Hence, the number of first-time car buyers skyrocketed in the last decade and a half.

This is due to the increase in per-capita income of the masses, easy car buying process and a handful of options for car loans. This was further fuelled by the impact of Covid-19 as consumers became safety conscious and wanted to invest in personal mobility in an attempt to move away from public transportation.

A pre-owned car is definitely an economical purchase and makes financial sense as it is a better value for money than a new one- it is not only an upgrade in life but also satisfactory in its economic value, general function, and usage. A used car is beneficial to first time buyers upgrading from two-wheelers or public transportation.

Interestingly, the mind-set of car buyers in India is changing with the growth of the organised pre-owned car industry. These days it is easy to find a pre-owned car as good as a new car leading to an increase in demand for certified pre-owned cars. These cars come with a year warranty and a seven-day return; in case the buyer is not satisfied with the purchase.

What is the market size of the pre-owned car market in India? What are the projections for the next couple of years? What are the reasons for the growing demand for used cars over new cars?

The Indian car market is still at a nascent stage and underpenetrated in comparison to its counterparts of developed markets. The pre-owned market has immense growth potential with car ownership at a meagre 2 per cent. The pre-owned vehicles industry is largely unorganized in India, with a multitude of gaps.

Our vision is to make this tedious and tiresome process of buying and selling cars organised and online, we aim to solve the problem of trust. The used car market across the globe has been growing at a rapid pace. India is a $25-billion market for used cars and is 1.5 times bigger than the new car market. It is estimated to reach $50 billion by 2025. Since the pandemic outbreak, interest in buying a car online has increased significantly. After an unprecedented year that saw record e-commerce adoption across the board, online car buying has proved to be one of the hottest trends of the year. As per Cars24-Ipsos study, the frequency of an individual upgrading car through an online platform has substantially increased. Nearly 40 per cent of the respondents said they will prefer to buy their next car online. Young buyers (millennials and Gen Z) who account for 80 per cent of the buyers' base are helping feed the growing field of app and web-based channels. The rise in new-vehicle prices and lifestyle changes due to the pandemic are the major factors contributing to this shift.

What is the market share of Cars24 in organised car sales in India?

The pre-owned car industry has long been plagued with information asymmetry, fraudulence and lack of trust around the quality of vehicles. Over the past six years, we have identified and solved these various genuine customer pain points and disrupting the market, making us the leader with 90 per cent market share in the organised space and 5 per cent in overall industry.

With the advent of e-commerce players like us in the used car market, the industry is expected to grow at a CAGR of 10-15 per cent over the next five years.

What are the future plans of Cars24?

Cars24 recently launched its business in Thailand, Australia and UAE and is ready to launch business in other Southeast Asian and Middle East countries this year. It has earmarked an investment of over $100 million for international markets in 2021. We will soon be aggressively expanding in other Southeast Asia region in countries like Indonesia and Malaysia.

In addition to this, we are expanding and strengthening our financial services side to deliver the best customised financing solution to our prospective buyers. We have also invested in building seven company-owned and India's largest refurbishment vehicle facilities called MRLs to provide top-notch quality cars. The focus of the entire organization is to maximise growth in the near future and aim to become the world's biggest auto-tech company.

Are you planning to raise funds or acquire any similar company in near future?

We are a six year old company operational in four countries and continuously growing. This is a capital intensive business and raising funds will more often than not be a focus, because the nature of the business is such. Also, while we do not have any immediate plans to acquire similar companies, however, it is not something we are completely eliminating from the future.