Financing will be among the top business categories for Cars24: CEO Vikram Chopra

Used car marketplace Cars24 could see financing become one of the largest categories for the business, according to a top executive of the company.

Talking about the scope of the financing business, Vikram Chopra, CEO at Cars24, told Mint in an interview that over 80% of new cars are bought on finance and this is probably the case with pre-owned cars as well.

“Financing is more of a margin play, so it's significant. Over 60% of the cars that we sell to the customers on Cars24 platform get financed. In years to come, this number will start matching the car financing penetration in new cars, which is definitely 80% plus,” he said.

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Chopra said there are several use cases for financing, explaining that a customer may finance the same asset multiple times. “For example, you once took out a loan when you bought a car, and then you subsequently topped up that loan, using your car as collateral, or you got that loan refinanced, or bought an accessory for your car or changed tyres or you need a smaller loan for getting your car serviced.”

Income from financial services almost doubled to ₹300 crore in FY24, according to the company.

More financing

Financing is something that the company wants to do across the entire ecosystem, whether the customer comes directly to Cars24 or a customer goes to a dealer partner to buy a car, according to Chopra. “We are doing experiments to enable our dealer partners to also provide financing service through Cars24, which is in its early days.”

The Gurugram-based unicorn, which claims to have seen 25% revenue growth in FY24, says unit economics have become better. It has seen controlled expenditure in FY24 with loss increasing by a marginal 6% even as it claims to have seen improved gross margin. Its revenue increased to ₹6,917 crore in FY24 from ₹5,530 crore in FY23 even as its losses widened to ₹498 crore from ₹468 crore.

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CarDekho had last year shut down its retail business owing to high burn, highlighting the complexity of the business model. The used car space has seen four unicorns so far including Cars24, Spinny, CarDekho, and Droom. Yet, CarTrade is the only profitable player among the leading companies in the space.

In the last 18-odd months, the company has focused on launching new services, according to Chopra. The company has launched services like on-demand driver, insurance, repairs and maintenance, and RTO assistance.

Chasing profitability

The largest business, which is helping customers sell their cars, and the lending business are profitable, according to Chopra. The second biggest vertical, which is helping customers buy a car and the other smaller businesses are still loss-making. The company helps customers buy and sell used cars and charges a commission on the transaction.

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“We will give each business two to five years depending on where they are at the scale. But given that our core business of helping sell used cars makes money, it allows us to have a longer horizon on the other businesses,” he said.

“Helping consumers buy a car will take two to three years to become profitable but something like our spare part business or car servicing business or driver and developer, I think those will have a longer horizon of three to five years,” he added.

Ample funds

On the growth targets, Chopra said that the company's business over the long term will continue to compound at 10-15%.

Cars24 has raised a total funding of $1.08 billion from investors like Alpha Wave Global, Zennis Capital, Jake86 LLC, Trifecta Capital, and SVF Investment Corp, among others. The company last raised $329 million in Series G and $100 million in conventional debt in December 2021.

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Chopra claims that the company has all the money it had raised in its last funding round still in the bank. With operational profitability improving, funding is not on his immediate agenda.

The Indian used car market is expected to reach $31.62 billion in 2024 and grow at a CAGR of 15.1% to reach $63.87 billion by 2029, according to a report by Motor Intelligence.