Aiming for the sky in used two-wheeler arena

When Kantheti Srinivas quit Bajaj Auto some years ago, he was truly riding high then as head of its motorcycle business.

He is now back in the same arena but financing used two-wheelers which, by his own admission, is a completely different kettle of fish. Yet, Srinivas is enjoying every minute of it in his new avatar as Co-Founder & Managing Director of WheelsEMI.

Whilst at Bajaj, he had done both sides of the business: operating the auto finance vertical before moving on to sales and marketing. This helped him understand that brand drives sales while finance completes the sales process. “While the customer will walk into the dealership/showroom because of the brand, he will walk out only when finance is available,” explains Srinivas.

Even after calling it a day with Bajaj, he dabbled with some consultancy work but then decided to head back to the auto arena, which, along with finance, was his first love. “I began looking at the two-wheeler market where it was quite evident that nobody was looking at the pre-owned space closely,” says Srinivas.

During the Bajaj days, his team would track used two-wheeler prices carefully as swaps would often happen at showrooms. Beyond that, there was really no reason to probe the subject given that the top priority was new vehicle sales.

“The second hand two-wheeler market is very unorganised and different from the new one where it is the manufacturer who essentially calls the shots,” says Srinivas. “He creates the product, brand, decides the prices and the dealer has to fulfil these requirements.” In the second hand market, however, the manufacturer controls nothing be it the price at which it is bought/sold or keeping an eye on the dealer. These used vehicles are largely sold in dinghy shops where they are dumped.

A regular dealer does not deal with them and he catches hold of second hand specialists, better known as UROs (unorganised retail outlets), which then cart them away.

Srinivas then cites the example of King Koti in Hyderabad where there are 400 such UROs spread across barely two square kilometres. Such sights are equally common in Mumbai, Pune, Delhi or Chennai where one can find similar clusters gasping for space. Each of them stocks nearly 80 vehicles and it is here that customers converge to deal with their trusted UROs.

There are online companies such as Quikr and OLX, which have been attempting to disrupt this model but it is just impossible to do away with UROs since “you need somebody in between to buy”. As Srinivas says, the human interface translates into trust, which the online space just cannot provide.

Almost all UROs are commission agents who really don’t buy the bike but cough up the money and transfer the vehicle to the other person’s name once the sale is made. That is when Srinivas and his co-promoters realised that this was an interesting business to get into.

AC Nielsen was hired to carry out a detailed research and interactions with customers and UROs in five cities. And it clearly showed that finance was a big missing link as also warranty and free service. “We then knew that this was a good business model that could be built upon while other value-added services such as warranty and free service could be contemplated later,” says Srinivas.

The next step was to understand the buyer profile of these used bikes and scooters. It was obvious that they desperately needed one for their livelihood. The user could be a carpenter, delivery boy or a daughter in a family who needed a scooter to get around for his/her engineering classes since he/she could not ride his/her father’s bike.

Essentially, these buyers were part of the low/middle-class category with monthly incomes in the range of ₹20,000. Interestingly, says Srinivas, there are also affluent homes where people want to buy a Bullet, Harley or KTM at a price that is cheaper than a new one.

While the demand and supply side was now well understood, the key was to access funds. A friend suggested Srinivas to meet Elevar, a Bengaluru-based investor, which specialises in impact funding targeted at improving lives as part of the business model. The deal was soon completed and WheelsEMi was set in motion.

“We got the money in March, which will see us through this financial year and half of next fiscal by that time we will look at other investors,” says Srininvas. “Along with our own funds, the total capital right now is ₹27 crore.”

Pune became the headquarters while other offices followed in Chennai, Bengaluru, Hyderabad and Nagpur with Mumbai to follow soon. “In three years, we plan to be present in 70 cities across India,” he adds. There are over 100 people on the rolls with hiring happening “big time”.

Thus far, over 2,500 customers have been financed with ₹8.5 crore disbursed. “This is tough business and operationally challenging with customers who need constant chasing up,” says Srinivas. “It is not for the weak hearted by any chance.” One needs to meet customers and do a proper evaluation considering that there is not adequate documentation in place.

What is interesting is that WheelsEMI recently did a Triumph motorcycle sale in Bengaluru where a second hand model was sold for ₹10 lakh (with finance of ₹6 lakh). The company is now Triumph’s financier for second hand bikes.

Triumph is working to ensure that there is good financing for its used bikes where resale is not easy. “It is a rare case where a manufacturer is going the extra mile to push sales of second hand bikes,” says Srinivas. WheelsEMI has also financed purchases of Bullets, KTMs as well as a couple of Kawasakis and Harleys.

The team’s experience thus far shows that the Honda Activa is the top-seller in used scooters while in motorcycles it is the Pulsar 150. With a little more money, customers go in for a Royal Enfield Classic. The Pulsar 220 and the Honda Shine are also big draws. By the end of the day, the seconds market is essentially about a handful of brands, which is surprising for the world’s largest producer of two-wheelers.

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