<p>Indians started warming up to the idea of buying their cars – especially second-hand ones – online during the pandemic, improving the prospects of online marketplaces in the world’s fourth-largest automobile market.</p>.<p>The challenges faced by traditional car dealerships have also helped these relatively new entrants, so much so that three online marketplaces Droom, Cardekho and Spinny were able to attract big money from investors and join the unicorn club in 2021. A unicorn refers to a startup with a valuation of $1 billion and above.</p>.<p>“Today, there are a lot of choices for consumers. Besides these unicorns, there are others like Olx, Ola and Quikr,” said Anil Joshi, Managing Partner, Unicorn India Ventures - a Mumbai-based early-stage investment company. He added that the pandemic has led to a surge in demand for self-owned cars.</p>.<p>Unlike their traditional rivals, online auto platforms don’t have to spend on real estate or worry about the high cost of capital, making the unit economics of the Indian auto market gradually turn in favour of online platforms.</p>.<p>“Our tech and data science tools help us to eliminate the need for physical stores, working capital, Capex and human resources and thereby sell at 16% lower price than any other platform,” said Sandeep Aggarwal, the founder and chief executive officer of technology-enabled automobile marketplace Droom.</p>.<p>The online platforms have also been able to offer a wider selection, competitive prices and more convenience at a time when a global chip shortage, economic slowdown and inflation have pushed many shoppers to opt for a pre-owned car rather than a new one.</p>.<p>“The recent upgrade of fuel emission standards mandated by the government of India from BS-IV to BS-VI has increased the prices of new cars considerably,” Aggarwal said, adding that new cars currently account for only 4% of Droom’s total sales. </p>.<p>The used car market is expected to grow at a compounded annual growth rate of 11%, with sales going up to about 83 lakh units by FY26, up from 44 lakh in FY20, according to a report by consulting firm Redseer.</p>.<p class="CrossHead"><strong>Running a marketplace in India</strong></p>.<p>Aggarwal’s experience in running e-commerce platforms dates back to 2011 when he co-founded ShopClues during times when the term ‘marketplaces’ was new to the Indian consumer. His latest company, Droom, allows buying and selling of pre-owned and new automobiles on its platform by tying up with dealers and direct sellers across the country.</p>.<p>India’s unorganised and highly fragmented automobile pre-owned market also makes the case for an online marketplace stronger, said Aggarwal. “A marketplace makes it easy to aggregate,” he said.</p>.<p>Investors agreed.</p>.<p>“India’s used-car market is just under 3% of the total automobile industry – less than half of the global average,” Joshi said, underscoring the tremendous growth potential of the market. The pandemic push helped Droom to expand to 1,162 cities from 900 before, and raise the count of its dealer partners to more than 21,000 from 18,500 before.</p>.<p>It has also tied up with automakers such as Maruti Suzuki, Hyundai, Tata Motors and Mercedes-Benz to explore a direct-to-customer model of selling cars and two-wheelers by eliminating the dealers. </p>.<p>While Droom’s net revenue has been covering 100% of its marketing expenses, cost of goods sold and variable costs in the last 18 months, Aggarwal expects the company to turn profitable at an operating level in the current financial year. The unicorn, which filed draft initial public offering papers last November, plans to make strategic acquisitions and double down on ancillary services.</p>.<p>“We won’t be acquiring for geographical expansion or growth in the same category. We believe that the profitability lies in providing services like vehicle financing and insurance, telematics and content marketing. We will be doing acquisitions in this area,” Aggarwal said. Droom did not shed light on when exactly it would go public and blamed geopolitical conditions and market uncertainty after the end of a long tech rally for the wait. It said it was active in raising funds in a pre-IPO round.</p>.<p>“In this industry, whoever improves the user experience and takes care of delivering an end-to-end customer service will be the winner,” Joshi said.</p>.<p>(<em>This is the fifth story in the “a billion $ idea” series focused on startups that joined the unicorn club in FY 2021-22</em>)</p>
<p>Indians started warming up to the idea of buying their cars – especially second-hand ones – online during the pandemic, improving the prospects of online marketplaces in the world’s fourth-largest automobile market.</p>.<p>The challenges faced by traditional car dealerships have also helped these relatively new entrants, so much so that three online marketplaces Droom, Cardekho and Spinny were able to attract big money from investors and join the unicorn club in 2021. A unicorn refers to a startup with a valuation of $1 billion and above.</p>.<p>“Today, there are a lot of choices for consumers. Besides these unicorns, there are others like Olx, Ola and Quikr,” said Anil Joshi, Managing Partner, Unicorn India Ventures - a Mumbai-based early-stage investment company. He added that the pandemic has led to a surge in demand for self-owned cars.</p>.<p>Unlike their traditional rivals, online auto platforms don’t have to spend on real estate or worry about the high cost of capital, making the unit economics of the Indian auto market gradually turn in favour of online platforms.</p>.<p>“Our tech and data science tools help us to eliminate the need for physical stores, working capital, Capex and human resources and thereby sell at 16% lower price than any other platform,” said Sandeep Aggarwal, the founder and chief executive officer of technology-enabled automobile marketplace Droom.</p>.<p>The online platforms have also been able to offer a wider selection, competitive prices and more convenience at a time when a global chip shortage, economic slowdown and inflation have pushed many shoppers to opt for a pre-owned car rather than a new one.</p>.<p>“The recent upgrade of fuel emission standards mandated by the government of India from BS-IV to BS-VI has increased the prices of new cars considerably,” Aggarwal said, adding that new cars currently account for only 4% of Droom’s total sales. </p>.<p>The used car market is expected to grow at a compounded annual growth rate of 11%, with sales going up to about 83 lakh units by FY26, up from 44 lakh in FY20, according to a report by consulting firm Redseer.</p>.<p class="CrossHead"><strong>Running a marketplace in India</strong></p>.<p>Aggarwal’s experience in running e-commerce platforms dates back to 2011 when he co-founded ShopClues during times when the term ‘marketplaces’ was new to the Indian consumer. His latest company, Droom, allows buying and selling of pre-owned and new automobiles on its platform by tying up with dealers and direct sellers across the country.</p>.<p>India’s unorganised and highly fragmented automobile pre-owned market also makes the case for an online marketplace stronger, said Aggarwal. “A marketplace makes it easy to aggregate,” he said.</p>.<p>Investors agreed.</p>.<p>“India’s used-car market is just under 3% of the total automobile industry – less than half of the global average,” Joshi said, underscoring the tremendous growth potential of the market. The pandemic push helped Droom to expand to 1,162 cities from 900 before, and raise the count of its dealer partners to more than 21,000 from 18,500 before.</p>.<p>It has also tied up with automakers such as Maruti Suzuki, Hyundai, Tata Motors and Mercedes-Benz to explore a direct-to-customer model of selling cars and two-wheelers by eliminating the dealers. </p>.<p>While Droom’s net revenue has been covering 100% of its marketing expenses, cost of goods sold and variable costs in the last 18 months, Aggarwal expects the company to turn profitable at an operating level in the current financial year. The unicorn, which filed draft initial public offering papers last November, plans to make strategic acquisitions and double down on ancillary services.</p>.<p>“We won’t be acquiring for geographical expansion or growth in the same category. We believe that the profitability lies in providing services like vehicle financing and insurance, telematics and content marketing. We will be doing acquisitions in this area,” Aggarwal said. Droom did not shed light on when exactly it would go public and blamed geopolitical conditions and market uncertainty after the end of a long tech rally for the wait. It said it was active in raising funds in a pre-IPO round.</p>.<p>“In this industry, whoever improves the user experience and takes care of delivering an end-to-end customer service will be the winner,” Joshi said.</p>.<p>(<em>This is the fifth story in the “a billion $ idea” series focused on startups that joined the unicorn club in FY 2021-22</em>)</p>
