With the ongoing IPO season, CarTrade Tech is the first-of-its-kind company to go for listing on the Indian exchanges. It is the owner of popular platforms like CarWale and BikeWale - ranked number one in their category based on online search popularity. Both platforms enjoy strong brand equity with a collective average of 2.71 crore unique visitors per month for Q1FY22.
It also owns several other brands like CarTrade, Shriram Automall, CarTradeExchange, Adroit Auto and AutoBiz. Cumulatively, these platforms offer an entire value chain in the used vehicles market, be it marketing, buying, selling and financing of new and pre-owned vehicles.
The company earns its revenue from:
1) Commissions on vehicle sales through its platforms and auctions.
2) Listing subscriptions and ad revenues from OEMs, dealerships and other advertisers.
3) Marketplace and software solutions for OEMs, dealerships and banks.
4) Other services including auto finance, auto insurance, accessories, servicing, and inspections.
In India, the digital automotive ecosystem is still at an infant stage. The ratio of used cars to new cars sold in India is ~1.5x, while in the developed economies it is ~2-3.
There is a growing preference for used cars among first-time buyers that are expected to fuel the growth of the used car market in India. The used car market in India is expected to grow at a CAGR of ~11% in the next five years.
A vast automobile eco-space offers huge scope to build up a sustainable business model in the form of franchising and providing value-added services like financing, insurance and car servicing.
A few of the risks involved with the company's growth prospects are:
1) A prolonged downward trend in the automobile industry could affect the demand for cars and harm the company.
2) Shift in preference towards mass mobility and taxi aggregators could affect demand for new as well as used cars.
3) Elevated prices of petrol-diesel and rising level of traffic may discourage car purchasing. It is also possible that millennials may not see a car as a status symbol.
4) Government's encouraging policies and push for electric vehicles could hurt the demand for fossil fuel consuming cars.
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