Vikram Chopra, Co-founder and Chief Executive Officer of Cars24 — the e-commerce platform for pre-owned cars — credits the entrepreneurial lessons from his first startup FabFurnish for the success of his second. Whatever those lessons were, Chopra and his team certainly seemed to have handpicked the right ones because Cars24 recently joined India’s growing list of unicorns in 2020. The company became the first Indian startup in the automotive sector to reach the status. Today, the Gurugram-based firm boasts of a presence in India, UAE, Australia, and more recently Thailand.
Early lessons
Vikram recalled how supply was a bigger problem than demand while building FabFurnish. He said, “When we decided to start another venture, I think this was a thesis we were very excited about — the fact that there are several categories where you have to solve supply even before you could consider solving demand.”
He then went on to explain how the idea for Cars24 took shape, saying, “That’s what led us to cars — specifically, pre-owned cars — which is a segment that comes with high demand. But despite this kind of demand, most people struggle to find the right car. Even if they do, it is hard for them to ascertain if the car is of good quality. So, we believed that if we could solve the problem on the supply side of the equation, we could build a pretty big business in cars.”
Cars24 aims to offer dramatically better experiences to both buyers and sellers, not just in India but across the world. The idea stemmed from the tedious experiences Vikram himself had in the used cars market over the years.
Before he flew to the US to pursue his MBA, Vikram had a disappointing experience when he tried selling his used car in India. Years later, when he returned to the country and decided to buy a second-hand car, he discovered that not much had changed in the used vehicles market. He noted that it was impossible to verify if the quality of the car was good enough. What’s more, many of the senior members in his team recalled similar experiences.
These early lessons led to the birth of Cars24. Speaking about the marketplace, Vikram reveals, “We are trying to do what Amazon or Flipkart does for products in several categories. With Cars24, we want to absolutely change the way consumers buy and sell cars, and we aim to create not just satisfaction — but delight — in the process. You could come online, sell your car in an instant, and get the best price for your vehicle. Similarly, you could buy a car online, get it delivered to your home, and even test drive it for seven days. If you don’t like it, you can always return it — with no questions asked.”
Tiding over challenges
Like every startup, Cars24 too, faced its own share of challenges. Vikram likes to classify them into two categories — external and internal. Sharing examples of external challenges, he highlighted how several events have shaped the car industry in India in the past few years, such as demonetisation, the implementation of GST, the mandatory upgrade of cars in some cities, and of course, COVID-19. He added that each of these events have created shock waves in the used car market, often causing everything to come to a sudden and unexpected halt.
Talking about internal challenges, Vikram stated how the business itself is incredibly hard to execute. He admitted that they need to work on an incredible amount of infrastructure at the back end — work that customers never get to see.
“For example, we have in-house reconditioning centres that we call Mega Refurbishment Labs, or MRLs. These are physical locations where we recondition or refurbish cars before selling them to the consumer. We have the infrastructure to move any car between any two locations. This is also very essential for our business, because a lot of our cars sell from one city to another. So, a lot of logistics and warehousing is involved in our everyday operations. To execute this smoothly, we need to run a very tight ship in this business,” Vikram explained.
Finding a ray of hope
Not all the external events have been adversities, though. In the midst of the pandemic, Cars24 witnessed a sharp rise in user interest, with more people opting to buy and sell cars online. Vikram said that COVID-19 helped customers change their age-old habit of buying or selling cars in person. “Most of our consumers realise that Cars24 is not only about convenience, but also about improving their experience in every possible way,” Vikram admitted.
While a physical car dealership offers only 15 to 20 options to choose from, Cars24 provides thousands of options, making it easier for customers to get the car of their choice. There’s another issue that arises when customers buy a car from a seller in person. Typically, buyers only have around 30 minutes to check the car in and out. This can be extremely stressful because a car is a high-ticket item. Cars24 changes this radically, because customers can buy the car and keep it for the next seven days. After this period, if they have even the slightest doubt about the car, they can return it easily.
Helping hands on the path to success
While the team of Cars24 has undoubtedly been going from strength to strength, it takes a village to propel a startup to the kind of status that Cars24 enjoys today. Crucial in this support system are certain partners like Kotak Mahindra Bank, which has been pivotal in the company’s journey.
Elaborating on this, Vikram explained, “Because we are in a capital-intensive business, the operational burn rate can be pretty high. Apart from that, there is also the need to invest in the company’s key inventory — cars. This will naturally be a significant sum. Furthermore, a car can very well take around 30 days to sell.”
“Here’s where partners like Kotak have been of immense help. They have made it possible for us to scale this business — which needs an inventory of at least 30 days. Funding that requirement through equity can be very expensive. But debt allows us to not just build our assortment, but also do it in a more capital-efficient manner. There are not many precedents of such transactions, because the offline pre-owned cars market is small and fragmented. So, we are really thankful to partners like Kotak,” he added.
Moving on with conviction
In his advice to other entrepreneurs, Vikram believes the trick is to focus on input and not output, because you cannot control sales volumes or numbers. What you can control is the customer experience and speed of delivery.
Having conviction in the idea is key, especially while starting out, according to Vikram. “Whenever I doubt whether we are on the right track, I close my eyes and ask myself this — Do consumers really appreciate what we are doing for them? Do they see what Cars24 offers them as a value addition in their life? Would they be disappointed if Cars24 didn’t exist?
And the answer to these questions has always been a resounding yes. So, I believe that consumers indeed value what Cars24 brings to the table. I think it’s important to test your conviction every now and then, to see whether you still believe in what you do,” he said, signing off.
