Why investors are interested in CarDekho3 min read . Updated: 11 Feb 2016, 11:06 AM IST
What prompts investors to put their money in an auto portal like CarDekho.com that offers automotive news, vehicle reviews and also provides a platform to buy and sell cars
New Delhi: The presence of CarDekho.com, promoted by Jaipur-based IT firm Girnar Soft, at the recently-concluded Delhi Auto Expo was intimidating.
The web portal, which was also an exhibitor, had more than 100 staff (including editorial) at the show, the editor of a leading auto magazine claimed.
“They posted more than 300 updates (stories) in a single day," the editor said, requesting anonymity.
On way to the Expo Mart, where the expo was held and which is 40 km from Mint’s office on Kasturba Gandhi Marg, the portal dominated outdoor advertising. From the Noida toll plaza, Greater Noida Expressway to the Expo Mart itself, CarDekho hoardings were prominently visible.
Inside the media lounge which could seat roughly 60 people, the scene was chaotic. While some journalists from magazines and newspapers did find some space, others preferred to sit on the floor outside the lounge to file their stories. CarDekho was everywhere.
The firm, which is valued at $300 million, boasts of investors such as Ratan Tata, Times Internet, Sequoia Capital, Hillhouse Capital, Tybourne Capital and HDFC Bank. Clearly, it has no dearth of investors or money.
But, what prompts these investors to put their money in an auto portal that offers auto news and reviews and also provides a platform to buy and sell cars? It is the latter, it seems.
When the government ended subsidies for petrol a few years, the fuel became costlier, triggering a rush for diesel cars.
The rush to buy diesel cars a few years ago with the prices of petrol being pegged to open markets and then the sales declining on account of the economic slowdown led to a visible growth in used car volumes. This was supported by investments the manufacturers made in growing the dealer network for used cars and branding activities.
A Deloitte report estimates the used car market to be the same size as the new car market. Only a few years ago, it was thought of as a third of the new car market. India sells as many as 2.6 million a year.
As per India’s Auto Mission Plan-II, the passenger vehicles (PV) market is expected to more than triple to 9.4 million units by 2026 if the economy grows at an average rate of 5.8% a year. If the economy grows at an average yearly pace of 7.5%, the size of the PV market is forecast to rise to 13.4 million units, making it the world’s second largest, behind only China.
Moreover, 67% of the used-car customers are in the age group 26-35 years, the Deloitte report says, which also highlights the fact that first-time buyers are increasingly opting for pre-owned cars largely due to their preference for bigger vehicles at the price of an entry-level car.
“With the increasing population of cars in use, there is potential for the used car market to double in size (in the next few years)," the report said.
CarDekho’s massive presence at the expo stems from its intent to consolidate the online pre-owned car market. The firm hired Hyundai Motor India Ltd’s head of marketing Nalin Kapoor as its chief operating officer (COO) as it looks to accelerate consolidation in auto classifieds industry and seeks a wider play globally. The Zigwheels deal was its third acquisition in the last one year. It also acquired Naspers Group-owned Gaadi.com, another automobile site, and a Delhi-based cross-product price comparison portal BuyingIQ.com.
Clearly, this creates a big business space that CarDekho wants to exploit. There are other contenders too but they may be small in size. Mumbai-based rival CarTrade.com from MXC Solutions India Pvt. Ltd acquired a new car-selling portal CarWale.com from Automotive Exchange Pvt. Ltd for an undisclosed amount in November. Other companies in the used car segment include Droom Technology Pvt. Ltd that raised $16 million in a round led by Lightbox in July and Truebil (Paix Technology Pvt. Ltd) that raised $500,000 in its first funding round from KAE Capital in June.