Droom Technology, the online transactional platform for automobiles, recently acquired Delhi-based non-banking financing company, Xeraphin Finvest, for an estimated USD 3 – 3.5 million. The online auto services provider is expanding its fintech business under Droom Credit Business Unit to drive auto loan disbursals and insurance for purchase of preowned vehicles and facilitate dealer financing options.
In contrast to declining sales in the new vehicle market, the pre-owned car market has been steadily growing over the past couple of years. This has prompted companies like Maruti Suzuki and Mahindra & Mahindra to set up divisions to sell preowned vehicles, which are posting robust growth.
According to Shashank Srivastava, Executive Director, Marketing and Sales, Maruti Suzuki India, while the used car market registered a 16 percent overall growth last year, the company’s True Value division registered around 19 percent growth. According to sources, close to 4 million used cars were sold last year. However, while customers can avail of vehicle loans from banks, they have to pay higher interest rates as compared to a new car – often in the range of 20 percent as compared to 9.40 percent for the latter.
Offering viable financing and credit facilities can, therefore, promote this segment further. Additionally, extending inventory financing to dealers can help them invest in more stock. Hence, companies like Droom are investing in fintech organizations to build a robust ecosystem for its customers and dealers.
“The traditional banking system is quite conservative and is usually amongst the last to turn to technology. Xeraphin’s acquisition gives us a great advantage in used vehicle financing,” Aggarwal told.
He added that the preowned car financing business is currently registering 100 percent monthly growth. To keep pace with this progress, it recently set up an AI lab to leverage AI, machine learning and Big Data to improve the solutions on its marketplace. It also places lot of onus on its ‘Orange Book Value’ used vehicle pricing engine, which gives users an estimated value of a preowned car.
In countries like India where affordability is pertinent, auto companies bank on tech to help customers make the right purchase decision keeping price in perspective. Gurugram-based Cars24, which also sells pre-owned cars online, is investing heavily on technology to improve its proprietary auction mechanism. Co-founder, Gajendra Jangid, said that the company wants to improve the efficiency of its pricing mechanism and is focusing on machine learning to reduce errors and gain better yields from each auction on the platform.
By leveraging fintech to ensure an optimal price-value equation, companies like Droom and Cars24 are in a better position to beat the slowdown in the auto industry.