Why Are So Many Used Car Startups Becoming Unicorns in India?

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In this video, we will try to understand why are so many used car startups becoming unicorns in India.

00:00 Introduction
00:35 Financials of four used car unicorns – Spinny, Droom, CarDekho and Cars24
02:15 Changing consumer behaviour and growth of used car market
04:20 How startups are incentivising you to buy used cars
09:13 How pandemic accelerated the sale of used cars
10:54 Organising the used car market

Financials of four used car unicorns – Spinny, Droom, CarDekho and Cars24: Firstly, Spinny is the latest used car startup to become a unicorn. Spinny sells 3,000 cars every month and each car is sold for around 4 lakh – which brings their revenue to around Rs 100 crore every month. Then we have Droom which is raking in Rs 135.5 crore in revenue in FY21. Next we have CaDekho which has more than 8X their revenues in the last five years to reach Rs 884.4 crore in FY21 and finally we have Cars24 – the used car behemoth. They roughly sold 20,000 crore in FY21 – bringing in a revenue of Rs 2,793 crore – which is 8X of what they were doing five years back.

Changing consumer behaviour and growth of used car market: The reason why these startups have been able to grow at such a breakneck speed is because they are changing the consumer behviour, they are changing the way people are buying used cars – making this experience even better than buying a new car. Which is the reason why the used car market is predicted to be double in size of the new car market by 2025. While the used car market is expected to expand from 3.8 million in FY21 to 8.2 million by 2025. On the other hand, the new car market is only going to expand from 2.6 million in FY21 to 3.9 million by 2025.

How startups are incentivising you to buy used cars: They are doing is by obsessively focusing on their customers and giving them exactly what they need. When buying a new car, a consumer has limited options from fewer models to pick from and only a handful of choices are available for you and on top of that these cars are new which means if there are any glitches in their performance – you will probably not buy a car from the same brand again. Used car startups on the other hand have changed the entire game, they are able to offer a lot of choices to their customers from different colours to different variants to different prices. And the best part is, even though these are used cars – they are giving them an experience which is similar to buying a new car and sometimes even better. They not only give you are ride in the car that you might want to buy but will also give you financing options as well as deliver the car to your home. Since the used car market has been mostly unorganised until this point, customers were thrilled to see these startups offering everything from verified cars to a superior experience.

How pandemic accelerated the sale of used cars: Then we also have the pandemic to thank – which not only stifled the growth of new car sales. Since new cars need chips and thousands of them and with the supply chain completely disrupted, people were unable to buy new cars because they are simply not being manufactured. Also, people became a little more sceptical of public places and buying a car of their own seemed like a much better option to travel. But they couldn’t buy new cars at this point, so they turned to buying used cars. It might have been a challenge but thanks to these startups and their superior customer experience more and more people are now comfortable buying used cars over new cars.

Organising the used car market: These startups are not just growing the entire used car market but also organising it as well. In 2011, only 10% of the used car market was organised and consumers weren’t sure of the quality of used cars they were getting. Now, however, it is expected that by 2025, 45% of the entire used car market would be organised. Thanks to these used car startups which are driving this change.

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