Cartrade – The Marketplace for trading Vehicles

• ByStartupStory     |    December 6, 2021

“The idea was to simplify car buying for Indian consumers”- Vinay Sanghi,founder and Chairperson of CarTrade. From the idea of turning a largely expensive, fragmented and precarious business to a well organised sector where the users put their trust in the better judgement of the business in exchange for a smooth, comfortable and secure transaction, Cartrade have earned themselves the spot as one of the most ingenious and ambitious company in the start-up ecosystem. Started in 2009 by Vinay Sanghi and Rajan Mehra, Cartrade and MotorExchange (now called CartradeExchange) were born with an idea to set up a platform that allows hassle free trade of used-cars under one roof.  The company grew to become one of the best platforms for used cars and made its Initial Public Offer on 9th August, 2021.

The man behind the Success

It goes without saying that Cartrade wouldn’t have had the success it has, had it not been for the experience and leadership of the company’s founder and CEO, Vinay Sanghi accelerating the growth of the company. Being from a family of businessmen in Mumbai, Vinay Sanghi started off young by being an active part of the family automobile business (Sah and Sanghi). Later he started a joint venture with Mahindra Group and HDFC called, “Mahindra First Choice” in 2000. He spent eight years as CEO of the company and observed very keenly the condition of the scattered used-car business. In 2009, Mr. Sanghi left the company and started his own venture, “MotorExchange” and subsequently, “Cartrade.com” along with Rajan Mehra. The company was owned by MXC Solutions Pvt. Ltd.

The Journey since 2009.

“The idea is to simplify the process”- Vinay Sanghi. Mr.Sanghi recognises the painstaking process of going from dealers to dealers to choose a car of liking that consumers have to go through. Cartrade is described as a marketplace where consumers can buy or sell a car from the comfort of their home. However, the business started off as a B2B(Business to Business) model where fleet owners or sellers used to auction their cars to dealers, organised by MotorExchange(later named CarExchange). These auctions were held both online and offline.

In 2012, after plotting and planning for four years, Cartrade opened up its B2C(Business to Consumer) model called Cartrade.com where consumers can now choose used-cars they wanted to buy with the help of various features and certification provided by Cartrade to accommodate the transaction.

In 2013, there was a growth in internet users, says Vinay Sanghi. This was the time Cartrade acquired a lot of capital and did television advertising. In 2015, Cartrade bought out and acquired its rival Carwale. Its acquisition also increased the user traffic in the company.

Cartrade has also tied up with banks, NBFCs, Insurance companies, Leasing companies, dealers and about 60+  corporations to facilitate easy transaction of  products. In its journey to its public offering, Cartrade already has a total of six subsidiaries including, Carwale, CarTradeExchange, Shriram Automall, Adroit Auto, Bikewale and Autobiz.

In August of 2021, CarTrade Tech went public with a price band of Rs1585 to Rs1618 per share and an issue size of Rs 2998crore.

Why build a marketplace for used cars?

According to Mr.Sanghi, along with India being the 5th largest market for cars in the world, the used-car business in India is bigger than the new car industry with about 3.8 million units and 1.5 times higher than the new-car units. The largely fragmented business was incredibly difficult to manage offline on a large scale and quite impossible on a nation-wide basis. “We knew that the problem could only be solved by the internet,”stated Vinay Sanghi. Cartrade.com gave the Company excellent leverage over the management sector where Vinay Sanghi and his partners could rope in more and more dealers, fleet owners, consumers, leasing companies, insurance companies etc under one roof and expand their company to new heights. He expected the car industry to grow by 10 to 12% in the upcoming years. Later after acquiring Carwale, Cartrade also got into the business of new cars.

Funding and USP’s

Initially starting by putting his own seed money of Rs1 crore, investor Canaan partners came in with another $1 million after two months. By 2017, the company raised a total of $225 million from investors Tiger Global, Warburg Pincus, JP Morgan, Canaan Partners etc and by August 2021, CarTrade raised another Rs 900 crore from angel investors such as  Nomura, HSBC Global, Goldman Sachs, Jupiter India Fund, Elara India Opportunities Fund, Aditya Birla Sun Life Insurance Company, Bajaj Allianz Life Insurance Company, Bharti Axa Life Insurance Company, Axis Mutual Fund (MF), HDFC MF, Kotak MF and Sundaram MF.

Along with certification reports of used-cars and the comfort level, CarTrade also has unique features in its website. One of such features is the justifiable price. When the seller auctions its product, CarTrade expects to provide the buyer with an average justifiable price range. These features create stickiness of consumers to the company that helps the company.

With 32 million unique visitors on the website and 814k listed vehicles for auction, the Business turned profitable by 2018. The company suffered a net loss in FY21 due to the lockdowns despite gaining a total income of INR 2815 million. CarTrade also has a presence of franchise stores across big cities and 119 AutoMalls where consumer sellers can store their cars. According to Mr.Sanghi, the company aims to get into the business of servicing and insurance providers so that the consumer enjoys more physical presence of trust.

Mr. Sanghi strongly believes that the reason for the success of the company in spite of being the late runners in the and going ahead of old competitors is because of his decision to be relentlessly patient and improve on the used-car business without being fickle minded and jumping to some other sector. “I learnt to be patient as it takes a long time to execute in India. You can’t do many things and change directions. You have to believe in your own idea.Investors will have ideas, your employees will have ideas but ultimately it is a founder’s belief that will take you to success.” said Mr.Sanghi.

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