Why online brands are going offline to tap fast-growing used car market

automobile sector, automobile industry

In India for every new car sold, there are 1.3 to 1.5 used cars sold. The ratio in US is around 2.5.

Armed with $110 million funding received in January, Girnar Software-owned CarDekho is building a network of 200 used car dealerships across the country. It has already set up 31 stores altogether in Delhi-NCR, Bengaluru and Jaipur. Four new stores were added in Pune and one in Lucknow on Tuesday. Next stop will be Mumbai.

Vibhor Sahare, co-founder and CEO of Gaadi.com, says these will be company-owned stores and around `200 crore will be invested to set up and market this used car network. In India, car purchase is also an emotional affair, to some extent. The dealing should happen in brick-and -mortar stores and it was a conscious call taken by the company, says Sahare. The company has moved beyond research and has taken a step toward actual transactions.

Gaadi.com was acquired by CarDekho and has been being repurposed for offline stores called CarDekho Gaadi Stores. This is a retail auction business model for pre-owned cars, where the store buys the car upfront and puts it up for sale. Technology elements from the online platform such as an app evaluator, on-line auction and their insurance and used car financing products have been integrated into the off-line experience, Sahare said. Loan closure assistance and instant money transfer is part of the deal. Offline unlocks scale and monetisation, though costs are high but so are margins, he adds.

CarDekho is the third player in the segment to add physical stores to their online business. Cars24 and OLX Cash My Car have gone offline with their stores for used cars, and all are in the process of scaling up. All of them offer inspection, documentation and immediate cash to customers who sell their old cars, making it a hassle-free.

While the sales of new cars have slumped, there is no such decline in the used car market, says Sahare. At a time when new car sales are down, used car sales are growing. This may have to do with issues of affordability and liquidity, he adds. There is also uncertainties regarding continuation of diesel-powered cars, electrification of cars and BS-VI regulations. These uncertainties are driving increased activities in the used car segment as people don’t want to be stuck with old cars for long, Sahare said.

CarDekho Gadi Stores is linking 2,500 used-car dealers, and will be offering them a steady supply of used cars. CarDekho expects to sell a car within seven days of its buying. Around 85% of the used-car sales is still dominated by neighbourhood dealers while organised trade and OEMs share the remaining 15%.

In India for every new car sold, there are 1.3 to 1.5 used cars sold. The ratio in US is around 2.5.

A McKinsey & Company study says used-car segment will continue to grow in India, and by 2021 India is projected to become the third-largest market for used cars. SIAM forecasts that market growth will increasingly be driven by rising penetration of online platforms that enable used-car dealers to reach larger audiences.