Newer, Feature-Rich Cars, Primarily Suvs Are Driving Sales In The Pre-Owned Car Market – Vaibhav Sharma Founder & CEO CarzSo
Vaibhav Sharma, the Founder, and CEO of CarzSo in conversation with Siddharth Shankar of BWBusinessworld talks about the challenges and opportunities of the pre-owned car business.
Vaibhav Sharma, the Founder, and CEO of CarzSo
With the Semiconductor shortage extending the waiting period of new cars to over of 3months to 11months, rising raw material costs increasing the prices of new cars, the used car market has witnessed positive growth. While still being an unorganized market, a lot of used car startups have started offering a wide choice of vehicles, financing options, reliable and transparent pre-buying, and post-buying experience, leveraging technology to buy and sell used cars online. CarzSo is one such startup in the Indian used car market, a “Virtual” pre-own car dealership that facilitates the buying & selling of used cars digitally. Vaibhav Sharma, the Founder, and CEO of CarzSo in conversation with Siddharth Shankar of BWBusinessworld talk about the challenges and opportunities of the pre-owned car business.
How did the idea of starting CarzSo come about and how has the journey been so far?
Being trained on “The seven habits of the highly effective people”, I am accustomed to learn from failures. My previous failed startup in Healthtech “Carions Healthcare” (Creating EHR) during 2015-2016, was a key stepping stone towards building CarzSo.
In 2016, I got an opportunity to work in the auto industry and always working with an entrepreneur mindset, I understood the market and was always keen on resolving the challenges identified (based on my tenure and experience in the auto sector). CarzSo as a concept emerged in 2019, when I moved out of Audi / Porsche and started brainstorming on these challenges and the possible opportunities that arise consequently.
While brainstorming on the market opportunity, we realized that no single player was offering online retail of pre-owned cars in India (in 2019). Further, we learnt that the digital pre-owned car market is emerging as a game changer, especially with the Indian car industry set to become third largest. Pre-owned car market being larger than the new car market, growing at a faster pace, while also moving towards getting organized presented a huge opportunity. Hence, we came up with a vision of building India’s first virtual showroom for auto industry; we planned to bridge the gap between physical and digital sales of the car market leveraging futuristic technologies like AR and VR. We wanted to lay a solid foundation and be all set to scale up operations while staying at the forefront as the sale of cars in India digitize.
Being a consumer-centric company, CarzSo offers convenient digital experience through its online platform, we provide virtual tour of cars as well as the convenience of transacting online and offline. For instance, a customer can browse the car on CarzSo’s virtual showroom and can make the final purchase on its physical store (or vice versa).
In order to evaluate our business model, we initiated operational testing in the pre-pandemic phase of 2020, and despite the challenges faced during the pandemic, the response was positive. The focus from the beginning of 2021 was to further amplify team building and operations. Further along, by getting young, dynamic and experienced professionals on board from the auto, tech, finance and banking industry helped us further augment our business.
We plan on opening multiple specialty stores including Superstores in Tier 1 cities (with 300-500 cars inventory), Express stores in Tier 2 cities (with 50-100 cars inventory) and Virtual stores strategically focused on various consumer segments to promote online retail of cars.
There are multiple players operating in the same domain. In this highly competitive market, how does CarzSo stand apart?
CarzSo is working with a vision of becoming a Virtual retail store for the Indian auto sector.
Growth in the Indian pre-owned cars market is expected to be driven by the rural sector as well as tier 2 & 3 cities, and within the entry segment (“one of the key markets wherein other competitors aren’t focusing”), and we have built a strong business presence in non-metro cities.
- We launched our first express store in Ambala (Tier 2 city with a reach to rural and Tier 3 cities) and received a very positive response
- We are now focused on further scaling up operations building India’s first superstore of pre-owned cars in Gurugram and are also committed to opening multiple virtual stores strategically covering Tier 2 cities (with a reach to rural and Tier 3 cities) of Haryana starting from Karnal
We are also working on a strategic tie-up to support our customers with the best financing options, wherein we will soon start offering very attractive finance rates for the customers along with the buyback options at attractive pricing.
The pandemic has introduced numerous changes in the auto sector; how do you feel this has impacted the consumer sentiments in your domain?
The pandemic has impacted the pre-owned cars market positively; there have been several growth-driving factors:
- The demand for personal mobility is rising, while the global semiconductor chip shortage is resulting in longer waiting for new cars - the waiting period is ranging from 2-3 months to as high as 12 months for certain models and variants. This is leading to a rise in demand for used cars, while also resulting in a surge in the pricing of pre-owned cars due to a surge in overall car demand.
- In the pre-covid era of car shopping, most consumers used to enquire about cars physically, however, with the onset of the pandemic, consumers are moving towards online transactions.
How has the growth been for you - a journey of offline business to phygital showroom?
It has been quite a difficult journey - much more exciting than expected. We started testing the market in Q1 2020, which is when Covid hit us and during that period testing a physical business with limited capital and team was very difficult. We worked hard just ensuring that we are moving forward, sometimes the result wasn’t immediate but sooner than later our efforts started paying off.
- With limited capital, we focused on the physical operations and after a positive cash flow (within 3 months of launching the actual operations), we started investing our profits in building technology.
- CarzSo was launched with a vision of taking the pre-owned car sales online, and we wanted to offer a mix of virtual and physical sales which is a more efficient and convenient way for the customers to buy a car. Further, people are increasingly exploring and preferring online car buying options driven by the pandemic, therefore, we started working on building a virtual model, wherein customers can view cars virtually in real-time irrespective of their location.
Are you funded? If not, any plans to raise funds?
So far, putting first things first we were mainly focused on building the right team, while scaling both physical and digital operations to build a business model that is automated to achieve maximum possible growth with limited capital available and be ready for a SpaceX launch as we scale up.
Believing in working with an end in mind, we have been working hard with specific month-on-month targets and will soon consider raising external capital.
Can you share plans regarding your expansion in the next 1 year
- We are extensively working on improving our online platform, by adding multiple features to enhance the customer experience for online car sales, while also boosting the Virtual pre-owned car showroom experience. We are further working on amping up our overall technology to support the future of auto retail.
- We will be launching three superstores of pre-owned cars and multiple express stores.
- We are also planning on launching multiple virtual experience stores to improve our presence in Rural, Tier 2 & 3 cities, promoting online sales of pre-owned cars.
Elaborate on the present market scenario. What kind of business opportunities do you see in this segment?
With the Indian pre-owned car market standing at USD 27 billion in 2020 - expected to witness a 15% CAGR over 2021-2026 - the sector is heaving with possibilities
The growth in the market entails various opportunities:
- As more options for personal mobility come into picture with social-distancing risks looming large, pre-owned vehicles are no longer stereotyped with downsized social status, presenting huge growth opportunities
- The organized pre-owned car market is the fastest-growing channel in India, and is reaping benefits of the changing customer preferences (partly driven by cannibalization of the consumer-to-consumer and unorganized channels); although small, the organized channel is competitive, compelling players to offer new-age solutions across the physical and digital plane for buyers and sellers. The market is on its way to getting organized driven by rising access to digital listings as well as increasing number of dealerships in the organized and semi-organized channels.
- The role of digitization in the pre-owned car transactions has been profound, which is seen in the rapid increase in pre-owned car-related search queries - online used car platforms in India are looking to capitalize on this opportunity by using technology to offer consumers a convenient way of finding used cars across different budget brackets
- Financing presents another opportunity in the market; loans and other value-added services (insurance, warranty, maintenance etc.) easily available in the new car segment aren’t widely available in the used car business. Greater customer engagement and fast-tracked approval of loans through improvements in captive financing can perhaps accelerate growth in the sector
Any new trend you see in the pre-owned car segment in 2022?
- Rural markets, along with tier 2 and 3 cities are likely to play a critical role in driving business volume in the pre-owned car sector; the availability of multiple options across segments and budgets offers opportunities to people across these segments to own cars, which otherwise seemed difficult, considering the per capita dynamics of Indian economy.
- Consumers are increasingly looking for a safe, transparent and convenient option with negligible risk while purchasing used cars. The growth in consumers’ demand will be enabled by the organized pre-owned cars sector.
- The market will witness a digital push mainly driven by customers’ preference to limit physical visits for car busing in the wake of Covid; the accelerating trend of digitization will lead to an increasing share of sales through digital classifieds; digital platforms will gain further traction due to their wide reach, accessibility and ability to provide a variety of options.
- The market is likely to receive a boost from first-time buyers on the backdrop of the pandemic, primarily due to the restricted availability of public transport, and increased need for personal mobility. There is an accelerated demand for pre-owned cars, mainly due to increasing urbanization and nuclearization which is further expected to provide impetus to the need for personal mobility.
- Newer, feature-rich cars, primarily SUVs are driving sales in the pre-owned car market; due to the intermittent launches, SUVs are seeing faster replacement cycles. Intermittent model launches and feature-rich competitively priced vehicles will likely aid the shift towards SUVs in the pre-owned car space.
Share some data around the number of cars sold for far, revenues, cities tapped for far, etc
- Having launched our first express store in Ambala, we have a presence across the rural areas and other tier 1 and 2 cities adjoining Ambala; we also have widespread operations across Gurugram, and are planning to launch multiple virtual stores starting from Karnal – to further concentrate on non-metro cities and adjoining rural areas
- Further, in Gurugram, we are launching India’s first Superstore of preowned cars
- Having a solid base of customers, we are on target to reach 1,000 customers by the end of this FY
- Witnessing a steady growth in revenues, we have been growing at a consistent rate of 33% month-on-month this FY