MUMBAI -- A used-car sales revolution is underway in India, the world's fifth-largest auto market by unit sales, led by a startup that connects physical stores with online buyers and sellers.
Small and mid-size local companies have long handled the bulk of India's used cars. Cars24, founded in 2015, has disrupted this model. According to Gajendra Jangid, co-founder and chief marketing officer of its operating company Car24 Services, will likely double unit sales in 2019 over the previous year.
An estimated 4 million used cars are sold annually in the country. As the number of people shifting to cars from motorcycles increases along with incomes, sales of secondhand cars are expected to grow.
Sales through the Cars24 chain in December are projected to reach about 18,000 units, compared with 9,000 in January 2019. The tops the number of units by the third-largest seller of new cars.
Cars24 raised $100 million in October in a round led by U.S.-based Sequoia Capital. In addition to its existing 170 dealerships operating mainly under direct management, the company plans to introduce a franchise system for regional cities.
The company has sharply increased sales thanks to its user-friendly business model. Traditionally, sellers of cars would visit nearby used-car dealerships to have their cars appraised then sell to the highest bidder. But people living far from towns without access to competitive bidders would sometimes receive less than fair-value for their vehicles.
To solve this, the startup developed an auction app, allowing buyers and sellers around the country to compare prices. "This is like an e-commerce ecosystem. Cars24 is an Amazon for used cars," Jangid told the Nikkei Asian Review.
Another feature the startup touts is nearly instantaneous payment. Cars24's tie-ups with banks allow for immediate payment after a buyer signs the sales agreement. These and other features have "uniquely positioned" Cars24, says Jangid
But competitors are emerging with similar business models, among them major automakers. South Africa-based OLX Group is opening OLX Cash My Car stores in the country while the Indian CarDekho is increasing sales by offering both used and new cars.
Meanwhile, big automakers are paying more attention to the used-car market and actively promoting this side of the business. Maruti Suzuki India, the Mumbai-listed unit of Japanese automaker Suzuki Motor and the biggest automaker in India, introduced a used-car dealer network called True Value in 2017.
Maruti, which used to sell used cars at its new-car dealerships, created a separate brand to compete in the changing market. It has also introduced tough standards for used cars, accepting only vehicles that have been driven less than 100,000 km.
In the two years to August, Maruti opened more than 250 True Value franchises in 150 cities -- all run by locals and operating in much the same way as new-car dealerships. Over 800,000 vehicles were sold during the two-year period, mostly to customers between the ages of 25 and 45.
Automobile-to-information technology conglomerate Mahindra Group, which includes major Indian automaker Mahindra & Mahindra, plans to expand its Mahindra First Choice used-car network by 6% to 1,800 locations next year.
Unlike the True Value chain, which only handles Suzuki vehicles, Mahindra deals in other brands as well. In 2018, the group opened dealerships for used foreign luxury brands such as Mercedes-Benz, BMW and Jaguar.