New passenger vehicle sales in India are expected to see a record growth this financial year, but at the same time, the last two years has also augured very well for the used car industry. And for Spinny, the used car buying and selling platform, which turned a Unicorn last year it is “on track to achieve revenue of around Rs 3,000 crore this year (read FY2023).”
Niraj Singh, Founder & CEO, is confident that with the company’s focus on retail operations, quality products, restrategising of business model, the growth is quite achievable.
“We used to have exclusive control over the inventory, but it was not owned by us but by certain partners. We were working on a commission model with those partners. Now we have changed our inventory model while for a customer nothing changes, but internally for us the revenue model has changed.”
“Whatever you saw, the last financial year was just the commission. But now we are doing trading, we are already sitting at our basically monthly sales value of close to Rs 300 crore on average and this number is growing month on month. Whatever you saw last month was just the commission. But in the next financial report, you will see trading value, commission and financial services, insurance services revenue. We will be cross Rs 3,000 crore in revenue this year (FY2023),” shares Singh.
His confidence is on the back of various factors such as pandemic impact, affordable options, and growth of organised players, which has seen the used car industry witness a robust double-digit growth even on a month-on-month basis.
While it is difficult to put an official number to the size of the used car industry in India, because the industry is largely unorganised, rough estimates suggest that it is around $23 billion (Rs 187,749 crore) in FY2022 and grow at 19.5% CAGR till FY2027 as per a report by IndiaBlueBook.
According to Singh, while the share of organised players has grown from 7 percent a couple of years back to about 20 percent of the used car market, the fact of the matter is that the unorganised players still represent a large portion of the industry.
Impact of new car sales and expansion
On one hand, the supply chain issue which had led to a long waiting period for new car purchases leading to potential buyers opting for the used car segment. This has led to a mismatch in demand and supply for the used car industry as well.
Responding to the improvement in the automotive supply chain, Singh responds by saying that the sales of new cars will mean more inventory in the used car segment, which means further growth for Spinny as well as other players.
Going forward, the company has a robust plan to expand its presence in India. It aims to establish two more auto experiential hubs in Pune and Ahmedabad after inaugurating the first one in Bengaluru on November 23. In addition, it will also expand car hubs to 120 from the present 55 in the coming few years.
Singh is very clear that Spinny will continue to focus on solving and working in the mass market segment, so the potential to enter the used “two-wheeler or classic cars” is not there.
But when asked about the potential to enter the original equipment supplier (spare parts) business through contract or partnership, Singh says it is an area that the company is not looking at present, but once it establishes itself as a household name, it definitely is an option.
Funding and inorganic growth
One of the endevours for most start-ups is to keep raising money to run their businesses or expand quickly. Spinny after they had last raised $283 million (Rs 2,310 crore) in December 2021, as part of its Series E funding taking its valuation to over $1 billion (Rs 8,163 crore) are however, not looking to raise any more funds in the near future.
He says that at present, the company is already profitable in the first few cities – Delhi NCR, Pune, Bangalore, Hyderabad – where it started operations, the newer cities are in the growth phase and will turn profitable soon.
“There are lots of new initiatives coming up and new investments we are going on to make towards creating new facilities, enter new markets. But in spite of all the new pilots and experiments plus the existing markets growing with time, at a company level including all the cash outflows right, at the company level, which should be profitable in the next one and half years when adopted cash availability wise. I think there is no dependency mostly for any new round of funding,” shares Singh.
The used-car platform on the other hand has also not shied away from the inorganic move, be it the acquisition of Truebil or Scouto. According to Singh these moves were not part of gaining volumes or GMB but new capabilities towards its ecosystem. Going forward, the company will still be open to such moves to further solidify its position in the used car market as a reliable player.