Cars24 fires 600 employees as late-stage funding dries up

Used car retailer Cars24 has let go of around 600 employees from various departments.

Cars24 signs pact with Poonawala Fincopr

It joins a growing list of unicorns such as Vedantu, Unacademy, Meesho and others, which have recently laid off staff as the startup ecosystem stares at a funding crunch.

A person aware of the developments told FE that the startup’s decision to lay off employees is part of its “usual” performance-linked review process, and denied that these were due to cost cuts. Currently, Cars24 has more than 9,000 employees in the country, and the layoffs have affected around 7% of its overall team size.

“This is business as usual performance-linked exits that happen every year,” a spokesperson for the company said when FE reached out.

Recently, a few high-growth startups, including Vedantu, Meesho, Trell, OkCredit, Furlenco, Lido, Meesho, Unacademy, Better.com and others, have collectively laid off more than 2,000 employees. Experts say that a slowdown in growth and late-stage funding, coupled with investors and board members turning cautious after the tech stocks crash, have pushed startups to trim down their employee-related expenses.

Job cuts at Cars24 come just a few months after the startup raised its biggest round to date, a $400-million financing round led by Alpha Wave Global, which boosted its valuation to around $3.4 billion.

Cars24 turned a unicorn in November 2020 in a $200-million round led by DST Global. Founded in 2015, the startup takes care of the customer journey right from the discovery of vehicles to price estimation, financing and refurbishing. The Cars24 platform has seen accelerated demand in global markets, including across Australia, the UAE and Thailand, according to its earlier statements.

Globally, the used car retailing segment is valued at $100-billion currently. The segment emerged as one of the fastest-growing consumer internet verticals, especially after the pandemic caused havoc in the automobile segment in CY2020.

According to a report by Olx Auto and Crisil, India’s used car marketplace segment is expected to list more than 7 million vehicles by 2025-26, compared with 3.8 million vehicles listed in 2020-21. This is a CAGR of 12-14% over the next five years. In FY22 alone, the pre-owned car industry is expected to clock a growth rate of 15% due to Covid-19’s disruption on consumer spending patterns, and as digitisation penetrates more small towns.

Vikram Chopra, co-founder & CEO, Cars24, had earlier detailed its aggressive international expansion plans in a statement in December 2021 when the company had secured the $400-million funding round. Cars24 has also been vocal about its IPO plans when several reports indicated the firm has been preparing to go for a public offering within the next two years.

“Cars24 has aggressive plans for 2022 and beyond, and we can’t wait to put this investment to work. Today, we are witnessing greater acceptance amongst customers across the globe for our platform when purchasing their next car…As we continue to build the best infrastructure for the future with an end-to-end digital customer experience, we are confident that this will delight our customers with our high-touch industry experience,” Chopra said in his statement.
The pre-owned car retailing segment itself has seen heightened investor activity with startups like Spinny, CarDekho and Droom all being valued at over $1 billion in recent funding rounds.

Alongside the funding boom, Mumbai-based CarTrade recently went public with a `2,999-crore IPO in August that was oversubscribed by 20 times. However, CarTrade’s stock price is down significantly to `559 per share on closing day on Thursday, compared with a higher listing price of `1,600 as of August 2021.

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