CarDekho to invest US$ 20 million in used car business in FY21

CarDekho Group intends to invest US$ 20 million in used car business in FY21 as it forays into selling pre-owned vehicles through its upcoming franchise retail network, the company said.

The Girnar Software Pvt Ltd-owned venture, also a leading vehicle search platform, plans to open 250 franchise stores this year and ramp up this network to over 1,000 retail locations by 2022. The franchise outlets would be branded CarDekho Trustmark stores.

There has been an increase in demand of used cars as buyers are opting for budget-friendly personal transport while avoiding public transportation due to COVID-19 scare.

According to Mr Amit Jain, co-founder and chief executive officer, CarDekho, “Used car transactions for every new car sold would increase from 1.3 in FY20 to over 1.8 during FY21 as commuters are increasingly opting for personal mobility at a lower cost.”

In India, pre-owned car market had crossed 4 million units in size as the industry saw major changes after the GST rationalization to 12-18 per cent and penetration of organized channels, said findings of the Indian Blue Book, compiled by Mahindra First Choice Wheels Ltd, released last year.

The company also plans to launch its first franchise store for sale of certified used cars in Jaipur and has upcoming stores planned in Delhi NCR and Bengaluru respectively, it said in a statement.

It currently operates over 50 CarDekho Gaadi stores across India where it acquires used cars from their existing owners.

These CarDekho stores would be part of the fast penetrating organized channel in the pre-owned segment, similar to that of Maruti Suzuki True Value, Hyundai Motor’s H-Promise, Mahindra First Choice Wheels, Honda Auto Terrace, Toyota U Trust, among others.

It is seen that online sales platforms such as CarDekho are contributing considerably to the penetrating organized channel in the used car segment, which is expected to grow at 15-20 per cent year-on-year for next few years.

Similar user experience will be offered by CarDekho’s Trustmark stores that buyers get while visiting a regular new car showroom.

“Our pre-owned cars are checked for more than 200 parameters that includes previous accidents, tampering of odometer, among others. In a recent pilot project carried out in Delhi, only 30 out of 100 cars could meet the Trustmark criteria," said Mr Jain.

"We don’t take used cars that are driven more than 90,000 kms and are more than 9 years old," he added.

CarDekho also plans on offering 6-month or 7,500 km warranty on the vehicle’s engine and transmission to the buyer after stringent quality checks.

It also intends to offer financing and insurance options to its customers at the Trustmark stores. “We disburse car loans of about Rs 120 crore (US$ 17.02 million) per month," Jain said.

Currently, there are about 4000 used car inspections per month done by the company, Mr Jain said his used car business is doing better than the pre-COVID levels.

“CarDekho Gaadi stores are operating at higher run-rate currently," he said.

There was a 99 per cent recovery in customer traffic for used cars seen in June 2020, after the lockdown wherein cars in the Rs 1-5 lakh (US$ 1418- 7093) range saw maximum traction.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.