As more Indians turned to online platforms to access car servicing and repairs, the companies providing such offerings witnessed a spike in their income. Case in point, multi-brand car workshop and spare parts platform GoMechanic’s revenue rose 2.7x in FY22 when compared to the previous fiscal year, managing to inch close to Rs 100 crore.
The six-year-old company’s operating income surged to Rs 91 crore in FY22 as compared to Rs 34 crore in the previous fiscal. But its losses spiked 4X, outpacing revenue growth.
The company claims to have serviced and repaired more than two million cars since its inception. The sale of goods and services was the main source of revenue for the company which increased 3.25X to Rs 39 crore in FY22, as per the company’s annual financial statements with the Registrar of Companies.
Commissions and marketing support were the other two sources of income. Collection from these verticals grew 2.4X and 2.27X to Rs 27 crore and Rs 25 crore respectively in the fiscal year ending March 2022.
The company also earned other income mainly from interest on fixed deposits and the sale of investments which shrank by 52% to Rs 6.27 crore in FY22.
On the expenditure side, the cost of advertisement and promotion was the largest cost center for GoMechanic, forming around 31% of the overall cost which surged 3.8X to Rs 65 crore in FY22.
Employee benefit expenses surged 2X to Rs 62 crore in FY22 while the cost of purchase of goods and services which includes purchases from workshops and vendors increased 3.8X to Rs 38 crore.
The manpower hire charges and legal and professional costs for the Delhi-based company grew 4X and 4.5X respectively to Rs 18 crore and Rs 9 crore. That took its total expenditure to Rs 211 crore in FY22, a 2.8X jump over 2021.
With a high burn on marketing, GoMechanic’s losses spiked 4.2X to Rs 114 crore in FY22 from Rs 27 crore in FY21. Akin to its expenses, the cash outflow from operations also grew by 142% to Rs 155 crore in FY22.
Coming over to ratios, the ROCE and EBITDA margin of the company was recorded at -56.9% and -114.4% in FY22. On a unit level, the company spent Rs 2.32 to earn a single unit of operating revenue.
GoMechanic is spread across 60 cities with a network of 1,500 workshops in India. The company raised a $42 million round led by Tiger Global in June last year and is reportedly in talks to raise a new round from SoftBank and Malaysia’s sovereign wealth fund Khazanah.
GoMechanic counts Blume Ventures-backed Pitstop, myTVS, GoBumpr, Carpathy, and Crossroads among its major competitors. With roadside assistance vertical (RAV), it also competes with recently funded ReadyAssist, AUTO i CARE and car manufacturers with RAV facilities.
Counting as it does on the high charges of existing dealer networks, the third party model will always face the threat of a strong counter from the auto incumbents. Add to that the large unorganised sector, and this remains one of the toughest markets to operate in. The huge failure that was Carnation Auto which was helmed by former Maruti Suzuki boss Jagdish Khattar only underscored the many challenges in the auto servicing segment. The high advertising and marketing costs underscore the high cost of customer acquisition for GoMechanic. Many industry experts opine that the more viable model here is to specialise in specific kinds of repair and servicing work, instead of trying to go head to head on all in servicing against the authorised dealer networks. A broader menu than what brands like Windshield Experts, for instance. Of course, the long term transition to EVs could actually support such a model better, with fewer parts in cars, but that’s a decade or more away.