February 11, 2025
used-car-marketplace

India’s pre-owned car market has witnessed explosive growth over the last few years, with several startups reaching unicorn status, including Cars24, CarDekho, Droom, and Spinny. But why is this happening, and is this trend sustainable in the current economic environment? To answer this, we’ll dive into the factors driving this success and analyze the latest data to understand what lies ahead.

The Pre-owned Car Market: A Growing Opportunity

According to a recent report by Mordor Intelligence, India’s pre-owned car market is expected to grow at a compound annual growth rate (CAGR) of around 15.1% between 2025 and 2030. The market, currently valued at over $36 billion, is projected to surpass $73 billion by 2030. This growth is being fueled by increasing demand for affordable vehicles, a shift in consumer preferences towards car ownership, and digital disruption in traditional car sales channels.

A crucial factor behind this boom is the growing preference for personal mobility following the COVID-19 pandemic. With public transport seen as a risk, many consumers turned to pre-owned cars as a cost-effective solution. According to a study by OLX Autos in partnership with CRISIL, after the initial COVID-19 lockdowns in 2020, demand for pre-owned cars increased by 20-30% compared to pre-COVID levels. This surge was more pronounced in the southern regions of India.

Analyzing the Unicorns

1. Spinny

Spinny, founded in 2015, reached unicorn status in November 2021 after raising $280 million in a Series E funding round, achieving a valuation of $1.75 billion. The company’s success lies in its full-stack model, managing every aspect from car inspections and digital pricing to financing and post-sale services, ensuring a smooth end-to-end experience for customers. By 2023, Spinny’s monthly car sales had grown from 3,000 in early 2021 to over 4,500 and further increased to 7,000 cars by 2024. In the fiscal year 2023-2024, Spinny reported operating revenue of ₹3,720 crore (~$442 million) and reduced its year-over-year losses by 28% due to better financial discipline. The company has capitalized on growing demand among first-time car buyers, who now make up 76% of its customer base, with digital sales accounting for 70% of total transactions—a 13% increase from 2022. This robust growth highlights Spinny’s strategic positioning in India’s booming pre-owned car market.

2. Droom

Droom, established in 2014, has solidified its position as a prominent player in India’s online automobile marketplace, offering a diverse range of vehicles including cars, bikes, and commercial vehicles. In the fiscal year ending March 2023 (FY23), Droom reported revenues of ₹262.6 crore, a 32% decrease from the previous year’s ₹390 crore. This decline was primarily due to the company’s strategic decision to exit budget car sales and focus on mid, premium, and luxury segments, which offer higher margins. Despite the drop in revenue, Droom successfully reduced its net loss by 54%, bringing it down to ₹62 crore in FY23 from ₹137 crore in FY22. As of June 2024, the company reported an annual gross merchandise value (GMV) of ₹4,000 crore and annual revenue of ₹200 crore. Looking ahead, Droom projects a GMV exceeding ₹5,000 crore and revenue above ₹250 crore by the end of FY25, with an anticipated annual growth rate of 50% in FY26 and FY27.

3. CarDekho

CarDekho, established in 2008, initially focused on new car reviews and information but has since successfully expanded into the pre-owned car market. In FY2023, the company reported revenues of ₹2,331 crore, a significant increase from ₹1,600 crore in FY2022. This growth was primarily driven by its insurance marketplace, InsuranceDekho, and its fintech platform, Rupyy. However, during the same period, CarDekho discontinued its retail pre-owned car sales and consumer-to-business (C2B) verticals due to unviable unit economics. The company has diversified into car loans, insurance, and after-sales services, creating a robust ecosystem.

4. Cars24

Cars24, established in 2015, has demonstrated significant growth through its tech-enabled platform for buying and selling cars. In FY2021, the company reported revenues of ₹2,793 crore, reflecting an 8x increase compared to FY2017. Building on this momentum, Cars24 expanded its international presence in 2022 by entering markets such as the UAE and Australia. This strategic expansion contributed to a 25% increase in operating revenue, reaching ₹6,917 crore in FY2024. Despite a net loss of ₹498 crore in FY2024, the company continues to invest in technology and data science to enhance user experience and drive future growth.

Key Factors Driving Success

1. Digital Transformation

The digitization of car sales has disrupted traditional dealerships, with online platforms offering transparency, convenience, and competitive pricing. Companies like Cars24 and Spinny have built user-friendly platforms with AI-driven pricing algorithms, vehicle inspections, and instant financing options, making the car-buying process seamless.

2. Financing and Affordability

A key enabler of growth has been the availability of flexible financing options. Many startups have partnered with financial institutions to offer competitive car loans, including low-interest EMIs, which make car ownership more accessible to middle-class buyers. According to a report by CRIF Highmark, 75% of pre-owned car purchases in India are financed, compared to just 15% a decade ago.

3. Trust and Verification Mechanisms

Historically, buying a pre-owned car in India was seen as risky due to concerns about vehicle condition and fraudulent practices. Startups like Spinny and CarDekho have mitigated this with stringent vehicle inspections, warranty programs, and certified listings, thereby building consumer trust. Spinny, for instance, guarantees full car inspections and offers a 5-day return policy.

4. Expanding Consumer Base

The younger population, particularly millennials, has shown an increasing preference for personal mobility without the financial burden of purchasing a new car. According to RedSeer, millennials account for 55% of pre-owned car buyers in urban areas, and this demographic is expected to drive future growth.

Challenges and Future Outlook

Despite the impressive growth, pre-owned car startups in India face several challenges. Profitability remains a concern as high customer acquisition costs and operational expenses eat into margins. Additionally, the rising cost of vehicles due to inflation and global semiconductor shortages could impact demand.

However, many industry experts believe that these challenges are temporary. The long-term growth potential remains intact due to ongoing urbanization, rising disposable incomes, and increasing awareness of digital marketplaces. Startups are also focusing on ancillary revenue streams like car financing, insurance, and maintenance services to improve profitability.

Projections

  • By 2030, India’s pre-owned car market is expected to overtake the new car market in terms of sales volume, with an estimated 10 million units sold annually.
  • Startups like Cars24 and Spinny are already exploring AI-driven valuation models and predictive analytics to further optimize pricing and inventory management.
  • The entry of global players and increased investment from venture capital firms will continue to drive innovation and competition in the sector.

Conclusion

The rise of pre-owned car startups to unicorn status in India is not just a passing trend—it’s a reflection of shifting consumer behavior, digital transformation, and market potential. Companies that can address challenges around profitability and scalability while continuing to build trust and offer convenience will dominate this space. With the right strategic moves, the journey for these startups has only just begun, and we can expect to see more players joining the unicorn club in the coming years.

As Nandan Nilekani once said, “The next big businesses will emerge from sectors where the digital world meets traditional markets,” and India’s booming pre-owned car industry is the perfect example of this transformation.

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