Cars24 Raises $450M at $1.84B Valuation - India's Used Car Platform

Cars24 Secures $450 Million to Expand Used Car Platform

A substantial venture capital investment is bolstering the used car market, as Cars24, a rapidly growing startup originating in India, has successfully raised $450 million in funding. This includes a Series F round of $340 million and an additional $110 million in debt financing, intended to accelerate the company’s growth trajectory.

Valuation and Investors

The recent investment has valued Cars24 at $1.84 billion post-money, establishing it as a leading privately held used car startup on a global scale. The Series F funding was co-led by DST Global, Falcon Edge, and SoftBank Vision Fund 2, with participation from Tencent, Moore Strategic Ventures, and Exor Seeds. The debt component was secured from a consortium of financial institutions.

Strategic Allocation of Funds

According to Vikram Chopra, co-founder and CEO of Cars24, the newly acquired capital will be strategically deployed across several key areas. These include expansion into new national and international markets, enhancement of its technological infrastructure, and provision of financing options for both vehicle purchases and acquisitions.

Market Presence and Growth

Cars24 currently operates in over 200 cities throughout India and has facilitated the sale of 400,000 vehicles – encompassing both cars and motorbikes – attracting over 13 million monthly visitors to its platform. This positions the company as the largest platform of its kind within India.

Addressing Inefficiencies in the Used Car Sector

Chopra emphasizes that the core mission of Cars24 is to address the inherent difficulties associated with buying and selling vehicles globally. “Buying or selling a car is hard anywhere in the world,” he stated, “It’s just a broken experience everywhere, so we are trying to solve for this.”

Navigating the Indian Automotive Landscape

Cars24 launched in India in 2015, recognizing a unique market dynamic characterized by low car ownership penetration – approximately 2%, or 2 cars per 100 people, compared to the 50-80 cars per 100 people typically seen in Europe. However, a used car represents an accessible entry point to vehicle ownership for many individuals.

Market Potential in India

Chopra believes there is significant potential to increase car ownership in India, aiming to raise penetration to 10-15%. The current Indian used car market is valued at $25 billion and is projected to reach $100 billion in the near future.

The Cars24 Business Model

Cars24 employs a “buy-in, fix-up, and resell” model, similar to that of Opendoor in the real estate sector. The company appraises vehicles from sellers, purchases them upon agreement, reconditions them, and then resells them to new owners.

Key Advantages of the Platform

Cars24 offers a centralized platform, accessible through its website and app, providing users with a comprehensive inventory beyond local dealerships. This inventory is curated and priced using sophisticated algorithms. Data science and technology are central to the company’s operations.

Industry Recognition

Munish Varma, Managing Partner at SoftBank Investment Advisers, highlighted Cars24’s role in organizing the fragmented Indian used car market through its data-driven tech platform. Sumer Juneja, Partner at SoftBank Investment Advisers, emphasized the company’s commitment to enhancing the customer experience through technology.

Customer-Centric Approach

Cars24 distinguishes itself by offering customers the opportunity to test-drive a vehicle for up to seven days with a no-obligation return policy. This contrasts with the limited test drive options offered by traditional dealerships or private sellers.

Investor Confidence

Navroz D. Udwadia, co-founder of Falcon Edge Capital, expressed confidence in Cars24’s ability to replicate its success internationally, citing its strong supply-side advantages and focus on consumer experience. He also praised the founders’ leadership and vision.

The Evolving Automotive Landscape

The substantial investment in a used-vehicle sales platform is noteworthy given broader trends in transportation, such as the rise of ride-sharing services and concerns about environmental sustainability. However, the demand for personal vehicle ownership remains strong.

Impact of the Pandemic

Chopra noted that the COVID-19 pandemic has actually increased demand for personal vehicles in India, as individuals prioritize safety and convenience. He also anticipates that the adoption of electric vehicles will present new opportunities for Cars24.

Competitive Landscape

The used car market is becoming increasingly competitive, with several startups and scaleups vying for market share. These include Spinny (India), Cazoo (U.K.), InstaCarro (Brazil), Kavak (Mexico), and Carsome (Malaysia), alongside established players like Carvana.

International Expansion

Cars24’s investors believe the company is well-positioned to expand internationally, leveraging its successful model and strong market position in India. The company has already begun to explore opportunities in other regions.

Long-Term Vision

Rahul Mehta, Managing Partner at DST Global, stated that Cars24 is transforming the car buying and selling experience through its end-to-end digital platform. He expressed excitement about continuing to support the company’s growth and international expansion.

Note: This article has been updated to reflect Cars24’s request to clarify its description as a platform and to correct the number of active cities to 200 from 130.