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Chennai-based used car start-up Cars4all proposes to raise $3-4 million for its expansion programme.
The used car market in India is still at a nascent stage and highly unorganised. The Central government’s effort to regulate the segment is expected to have a positive impact on the market.
“India’s used car market presents a huge opportunity. This space suffers without adequate organised players. Though some disruptions have been made by some new-age players, the market potential is immense,” M Selvarathinam, Founder and CEO of Marvar India Pvt Ltd, which owns and runs the five-year-old Cars4All, told BusinessLine.
Also read: Smaller towns to drive sale of used cars: CARS24
With over three decades’ experience in the automobile industry, he is of the view that the upcoming legislation to bring the used car market under GST would turn it more organised over time.
The Ministry of Road Transport and Highways had, in December 2022, announced the Central Motor Vehicles (Twenty-Sixth Amendment) Rules, 2022, which mandates authorisation to possess and deal in used cars. It specifies that all pre-owned cars should be listed on a portal, and the sellers should register as certified dealers along with GST details. The objective is to prevent fraudulent activities and bring accountability and transparency to the sale and purchase of used vehicles in India.
Availability of financing
Selvarathinam said Cars4All currently sells about 150-200 pre-owned cars a year and targets increasing this to 500 in 2-3 years through expanded operations.
The company’s focus area is the Rs 5-7 lakh price bracket as of now. “Though affordability levels have gone up as middle-class people are ready to spend up to Rs 20 lakh, in the pre-owned segment the Rs 5-7 lakh category is the major one. Financing is also available in plenty and fintech players have also contributed to this sector’s growth,” he added.
Also read: Used cars: A market waiting to be tapped by organised players
The company currently operates one store in Chennai and plans to open more. It also plans to launch in Bengaluru, besides setting up a car refurbishment centre. Currently it has tied up with 2-3 firms for car refurbishment services.
Scope for good margins
“We may have to raise $3-4 million to fund our expansion and we are exploring all options. We see good scope to run this business profitably with a decent margin,” he added.
Also read: India’s used-car market valued at $23 billion in FY22
The company’s average turnaround time is 21 days now. “If I can bring it down to seven days, it will have a positive impact on our funds flow,” he said.
The ratio of used to new cars sold in India is 1:1.4, while in the major economies it is 1:2 or 3. According to estimates, the Indian used car market is projected to reach about 8 million units by FY26, up from about 4 million in FY21.
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