When Vinay Sanghi left Mahindra First Choice Wheels in 2009, he had a fair idea what he was going to do next. With almost two decades of experience in the automobile industry, he had figured out that the growing middle class and urban population in India would not only buy cars, but would need a platform to sell the used cars as well to move on to newer models. And those who would be new entrants in the market would look for used cars in affordable prices and good conditions. Thus was born cartrade.com, the biggest online portal in India to buy and sell used cars. Vinay Sanghi, the promoter & CEO, MXC solutions Pvt Ltd which owns Cartrade.com, said in an interview to dna, that currently India traded 2.5 million used cars every year. He expects the number to double in the next five years. Here are some excerpts from the interview:
Why should anybody log on to cartrade.com?
Broadly I would say it has three reasons. First it enables you to find a car. We know at least 805 of Indian consumers check on the internet before buying a car. We are using the internet penetration in India to create a portal that is like any other marketplace to buy or sell a car. Given the variety of models and brands available, you might have to go to 20 dealers to figure out the car of you choice. If you tell us your brand preference and the budget and location, the portal can tell you what cars are available with which dealer. We have the largest inventory with 90,000 cars and 2000 dealers registered with us. Second, when you buy a used car you would want to know its condition. We have engineers in different cities of the country who assesses the cars and gives a condition report. So you get to choose a car that is certified by us. Third, you would want to know whether the price quoted by the dealer is fine or not. Here again we help by providing an approximate justified price you should be paying for the car.
Can you tell us about the business model? How does Cartrade make money?
It has a simple business model where the dealers pay us to register their cars with us. So currently we have 2000 dealers registered with us. For the customer who is looking to buy cars, our service is absolutely free.
How do you assess the potential of the growth in this industry keeping both auto industry numbers and internet penetration numbers in mind?
As I have already mentioned, I expect the used car market to double in the next five years. India just has 10-11 cars per 1000 people, which is one of the lowest in the world, and this number has to grow. If you look at the internet, I don't know if you are aware, one lakh smart phones are being added everyday. There are around 200 million smart phone users today that will also double in the next 2-3 years. In fact, 40% of the users of our portal access it through mobile devices. In the past people would ask experts on the car they would go to buy. Today they might just upload a picture on Facebook and ask their friends for opinion. So we have to be present on Facebook and Twitter for people to log in through their accounts.
If you can divide the auto industry in terms of price range, where do you see maximum growth coming from in the future?
The largest market for used cars is concentrated in the Rs 3-5 lakh segment. They are the buyers who want a second hand car which has a market price of say, Rs 5-7 lakh. And the market will see the highest growth in this segment in future: the first time buyers perhaps. The luxury car market is also growing well. Of course it cannot match the volume of the low price segment. But the growth rate here is very high. This is the segment that sells used car for Rs 15-20 lakh for a car which would have a market price of Rs 40 lakh for the new car.
Regionally do you see future growth being pulled off mainly in Tier II or III cities or towns?
I don't think so. For two wheelers the smaller towns may be driving growth. But for the auto industry growth will be concentrated in the top 25 cities in the country, while for two wheelers it could be coming from 30-35 cities. We currently have employees in around 80 cities. But currently the 75-80% of auto sales come from the top 25 cities, and the trend might not change in a hurry.