Used car marketplace Cars24 raised $200 million in its latest funding round at a valuation of more than $1 billion, the first Indian startup in the automotive sector to achieve unicorn status, as a raging pandemic prompted consumers to shift towards personal mobility.
The Series E funding was led by billionaire Yuri Milner’s DST Global fund. Existing investors including Exor Seeds, Unbound and Moore Strategic Ventures participated in the round.
The increased demand for used cars has been propelled by the fear of using public transport amid an unabated rise in coronavirus infections in top cities. Startups such as Gurugram-based Cars24 offer users an easier and trusted way to buy and sell used cars.
The capital will be used to bolster Cars24’s new lines of business such as pre-owned two-wheelers, customer financing and vehicle servicing.
“People who did not have cars are looking to own a car due to safety issues while many others want to upgrade from two-wheelers. There is a surge in traffic on the website, and monthly transactions have surpassed pre-covid levels,” said Vikram Chopra, co-founder and chief executive of Cars24.
The fresh funds will also be used to hire people, build the brand and increase market share from 4% to double digits, Chopra said in an interview.
After seeing a sharp decline in business during the lockdown, Chopra said the company has seen a robust recovery. The pandemic augmented the appetite of the industry with an increase in inquiries for pre-owned vehicles, he added.
Chopra said the company’s focus would be on the used two-wheeler category that was launched during the unlock phase with Cars24 Moto and the financing business.
The company acquired a non-banking financial company licence last year for its lending business, Cars24 Financial Services, with an aim to provide instant access to credit. “The market for used cars and bikes in India is a huge $50 billion opportunity, and we are the best set to ride on these tailwinds.”
While new car sales slowed down during the lockdown, the pre-owned car market has continued to grow over the past few months and is now larger than the new car market. In 2018-19, while new car sales were recorded at 3.6 million units, 4 million used cars were bought and sold, according to a report on India’s pre-owned car market by IndianBlueBook, a used car pricing guide by Mahindra First Choice Wheels.
“Cars24 has pioneered a significantly differentiated experience for the customer and dealer by deeply leveraging data and technology at each step, resulting in world-class operational efficiency and market leadership in the segment,” said Rahul Mehta, managing partner at DST Global.
A slowdown in new car sales could mean the demand is shifting towards the pre-owned market, automobile industry executives said. In fact, many people have replaced their old cars with pre-owned cars instead of buying new ones.
Cars24 has benefited from this trend, with annual transactions on its website exceeding 200,000 units, topping pre-covid levels. To meet the demand, Cars24 has expanded its presence from 155 outlets in 35 cities to 230 outlets till September.
Cars24 is the eighth Indian startup to become a unicorn this year. The others are Pine Labs, FirstCry, Nykaa, Unacademy, Zerodha, Razorpay and Postman.