Pre-used car selling marketplace Spinny is likely to turn profitable by the third quarter of calendar year 2024 as most of its mature markets, like Delhi, Bengaluru and others, which account for about 65% of its sales, have already begun to report profits, Niraj Singh, co-founder and CEO, Spinny, told FE.
He added that reduced marketing spends, higher margins and lower customer acquisition costs (CACs) will also aid the company reaching the profitability mark.
The Tiger Global-backed firm sells about 7,500 cars each month, or roughly 90,000 cars a year. This is a sharp increase from around 1,000 units it sold every month in 2020.
“Our cash burn rate has halved from last year and in about 15 months it will be zero. We’re not dependent on any external capital for our business. So, worst-case, we’ll turn profitable by Q3CY24, it may even come sooner,” Singh said.Spinny’s operating revenue jumped 4.3X to `110 crore in FY22 while its losses increased 4.4X to `490 crore.
“The used car segment is not about being constrained on the budget side anymore. The lines between a used car buyer and a new car buyer are getting blurred. Now, a car buyer is a car buyer, exploring both options which pushes up our customer base significantly,” he added.
Spinny’s closest competitor in the space, Cars24, sells just over 5,000 cars each month. According to analysts’ estimates, Spinny is the market leader in the space with a share of around 55%. Other players like Cars24, Droom, CarDekho and the like account for the rest. Spinny is currently growing 5.5-6% month-on-month. “The m-o-m growth used to be 15% earlier, then 9% a couple of years ago but as our scale increased, maintaining that pace of growth was difficult,” Singh said.
“The slower pace of growth is intentional. We are now chasing higher gross margins, reducing our customer acquisition costs (CACs), reducing our marketing spends, among others. Now there is the right balance between growth and profitability. Earlier, we had to prove ourselves that our model was the best, because of which we chased only growth,” he added.
According to analysts, new-age used car dealers typically earn a slim margin of around 10% on every transaction.
Spinny plans to double down on Spinny Max, its luxury used car segment. Currently, Spinny Max – where luxury cars from Mercedes, BMW, Audi and the like are sold – accounts for about 3% of Spinny’s gross merchandise value (GMV), which was at `400 crore a month.
The company had initially planned to push that number up to around 5-6% but is currently forecasting that 10% of its GMV could come from Spinny Max over the years.
“Indians are becoming more aspirational. Instead of buying a Hyundai Creta for around `17 lakh, a customer is choosing to buy a BMW X1 for `16 lakh from Spinny,” Singh explained.
That has also pushed up the company’s average selling price (ASP) to around `550,000 from `460,000 a few years ago.
The company is present only in 15 cities, of which in seven it began operations only last year.
This is a tenth of Cars24’s scale, which is present in over 150 cities. “Tier 2 and regions beyond are picking up but do not yield the desired return on effort (RoE) yet. The markets aren’t that deep and because of that it won’t be that efficient,” Singh said.