In an ever slowing automobile sector in India. Here’s a look at automotive e-commerce platform CarDekho’s profit churning formula.
The recent Indian economic slowdown has witnessed a steep decline in the automobile sector. Many giants like Maruti Suzuki, Tata Motors, Hero MotoCorp had to halt their production cycles for days in 2019. According to a report by international credit agency Fitch Solutions, “vehicle production in India is likely to contract by 8.3 per cent in 2020 following an estimated 13.2 per cent decline in 2019.”
The dipping GDP has resulted in fewer customer needs hence the e-commerce newbies are now under a threat of loss too. Yet, the famous automotive e-commerce platform CarDekho managed to keep the losses away with its unique profit centric business model.
Founded in 2008, by brothers Amit and Anurag Jain–CarDekho is owned and operated by Girnar Software. It has gradually emerged as the only trustworthy online auto classifieds platform. The company is not only famous for its variety of products and services but its unique profit churning business model too.
Keeping The Competition Low
A great company is always known to achieve milestones and grow significantly, thus CarDekho has smartly worked on keeping their competition low by acquiring gaadi.com (2014) and zigwheels.com (2015)– for 11 million dollars which together contribute to 80-85% estimate of total leads. In November 2019, it acquired Philippines-based online car classified site Carmudifor an undisclosed amount. Based out of Jaipur, Rajasthan, the classified platform has now expanded its business in 20 countries across Asia, Africa etc via this acquisition.
The versatile revenue generation strategies have managed to keep up the good profits despite the auto sector’s slowdown in 2019.
The company is majorly sponsored by Google AdSense. Amit Jain, co-founder, in an interview shared, “AdSense is a must-have for all sites looking forward to a sustainable and profitable business model. It may not be the primary source of income as you scale your business model to earn from other sources. AdSense does add to a considerable amount of revenues generated without having to worry about hiring a sales team to sell inventory. Had it not been for AdSense, CarDekho would not have come this far without VC funding.”
Newcomers like Nissan’s Datsun and South Korean multinationalKia Motors are CarDekho’s official advertising partners. Furthermore, a sure shot profitable lead generation process delivers huge amount from production companies irrespective of their online and offline sales. Considering a minimum 2% conversion ratio, the company can manage to make 20000 leads a month. Adding up to CarDekho’s profit churning.
Another budgeting partnership lies within the loan disbursement business through private financial partners, which according to the company’s financial statement provides a great percentage of the loan amount to CarDekho as revenue. For the financial year 2018, CarDekho saw its financing business scale tremendously with the firm having disbursed loans worth over Rs 1000 crore from Rs 200 crore in 2017. The firm processes loans worth Rs 60 crore each month for financing of used cars.
Finding the True Value Ride
A company’s credibility comes with customer satisfaction. CarDekho is also popular among those having an eye for used vehicles. The company has come up with the idea of True Value Services which includes 200 parameter checks and numerous after sales services for used cars.
The company’s used car business alone has 3000 dealers out of a 5000 strong dealer network. The used car business provides an end-to-end transaction model that adds up to significant growth.
Insuring a Safe Ride
With the vehicle insurance and security cover being a mandate after government’s recent vehicle act amendment, it becomes necessary for the users to get their vehicles insured–Customers don’t need to look further as they can simply carry-on with CarDekho to purchase insurance.
This not only helps customers to get trusted insurance but also adds some moolah to the company’s funds. CarDekho has steadily been building its insurance and finance growth engines over the past year to enable a more entrenched dealer network for the two verticals. With the insurance business covers over 800 dealers, around 450 dealers offer financing services for used cars.
CarDekho is today valued over USD 300 million. Earlier in 2015, Ratan Tata made a personal investment in the company. One of the key reasons for CarDekho’s success is its ability to leverage digital marketing especially SEO(search engine optimization) to create massive reach leading to drive over 10million visitors every month. Co-Founder of the auto-tech startup Amit Jain told Open Magazine, “We didn’t spend a single dollar on marketing, but we learnt Search Engine Optimisation. We put out good content.”
With the availability of growing consumer needs, the e-commerce platform is also maintained perfectly which sells all the car accessories, under its sub-domain CarDekho Accessories, which you may find a little expensive when compared to offline prices. The company also gives you a variety of good quality durable tyres available on their dedicated e-com webpage designed to showcase all the major tyre manufacturers like MRF, Ceat, Bridgestone and many more.
In the financial year 2017, the company’s generated revenue amounted to 114 crores with a loss of 135 crores which in the year 2018 turned out to be 160 crores with a loss of mere 70 crores, giving CarDekho a huge 50% revenue hike.
As per 2019 financial year report, CarDekho has been funded by a total of USD 142 million till now. They stand firm against their business rivals CarWale and Cars24.
The focus on growing allied verticals, the right use of the e-commerce ecosystem and emphasis on customer care resulted in CarDekho churning out profit and growth in the otherwise slowing automobile sector.