Used car content and commerce platform CarDekho has shut down a number of its stores—Gaadi by CarDekho—across the country as it makes a move towards purchasing cars post a home inspection, a move the company believes is a more efficient business model for them owing to the impact of the coronavirus crisis.
Entrackr contacted a number of Gaadi by CarDekho stores and can confirm that anywhere between 21-25 such stores have either been shut down or will shut down by the middle of October. Most of these stores are in Delhi NCR including Faridabad and Ghaziabad, Mumbai, Pune and Bengaluru.
Post this, CarDekho has 60 operational stores across the country, although its major focus would be to purchase vehicles following a home inspection itself. It operates out of 88 Indian cities and will continue to do so via the home inspection model.
“We received a notice of termination from CarDekho in July , which said that they will be shutting down the store, the last date being October 6,” said a person who had leased his facility in Maharashtra to CarDekho, requesting anonymity.
Gaadi by CarDekho was launched in January 2019 in Delhi (NCR) and later ventured into many cities. Entrackr had exclusively reported about its launch.
When asked about the reason CarDekho gave them, several people pointed out that the company was either looking to shift to a smaller facility with a lower rent or was looking to buy vehicles after a home inspection only, in order to save costs — in line with the reason the company provided us with when we reached out to them.
All the 21 people who confirmed that their leased facility to CarDekho was being shut down said that they had given out a big space to the company. Store sizes varied between 700-1,000 square feet and more than ten of these people said that the monthly rent for such a place was close to or more than Rs 1 lakh.
“In contrast, if you move to a space which is between 300-500 square feet, you will have to pay half that rent,” a second person who had leased a store to CarDekho in Ghaziabad said.
In response to a detailed questionnaire sent by Entrackr, CarDekho’s co-founder and chief executive Amit Jain, said, “we buy 90%+ cars from home inspection now. [The] pandemic changed the way of business and that’s the short answer to all your questions.”
When we asked whether the company was going through any financial constraints, Jain said, “[the] company is super well capitalised so that’s not the issue at all”. He also explained that the stores that are in good locations and with good footfall which add branding value have been retained.
Multiple store owners also told Entrackr that CarDekho signed multiple rent waivers with them starting from last year, citing business issues due to the pandemic.
When we asked Jain about this, he said, “in [the] pandemic every company including ours renegotiated rentals, I guess that’s prudent.”
CarDekho had its last fundraise in December 2019 when it scooped up $41 million in a Series D round from investors Ping An and Lenarco Limited at a $643 million valuation. Entrackr had exclusively reported its Series D round in December 2019.
According to an ET report, the company is in the advanced stages to raise a new round that could push its valuation over $1 billion.
And like many of its competitors, it was not immune to the coronavirus crisis. In May last year, CarDekho had let go of over 200 employees, as the pandemic had hit the automobile industry hard like many other sectors. Entrackr had exclusively reported this development.
How the used cars space is cruising
CarDekho’s key rival Cars24 recently raised $258.6 million from eight investors including Tencent (via its Europe based special purpose vehicle or SPV: Zennis Capital BV) and DST Asia, among others at a $1.75 billion valuation. Entrackr had exclusively reported this.
The used cars space has turned out to be an attractive segment for venture capitalists and late-stage investors. Droom had claimed unicorn status in July with up to $200 million round while pure-play etailer Spinny had nabbed over $100 million in Series D round led by Tiger Global.
According to Entrackr sources, Spinny is witnessing inbound interest from investors and the company may raise a round by the end of this year and enter the unicorn club.
CarTrade, one of the early players from the segment, made its debut on the stock exchange in August. On the lines of the Vinay Sanghi-led company, Cars24 and CarDekho may explore fundraising via public markets. SoftBank-backed Ola also had thrown its hat in the used car space with Ola Car. It ‘s currently running pilots across several cities. Entrackr had exclusively reported about Ola Cars in July.