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The Gen Z Way Of Buying Two-Wheelers | Sumit Chhazed @ OTO Capital
378 Plays2 years ago
Think of having the flexibility of eCommerce, home trial, home delivery of a bike, and being able to pay a monthly subscription rather than an outright purchase - this is what OTO Capital is enabling. Sumit is a serial entrepreneur who had previously scaled the used 2-wheeler platform CredR to its peak. Listen on for tips on identifying opportunities and expanding businesses.
Know about:-
- Ideation phase
- Zero to One journey
- Solving the capital supply problem and scaling up
- Customer acquisition strategy
Recommended
Transcript
Introduction to Auto and Founder Thesis Podcast
00:00:00
Speaker
Hi, everyone. This is Sumit Chajed, co-founder and CEO of Auto. Take me on a tour. This could be a great intro. Hi, I'm Akshay. Hi, this is Aurob. And you are listening to the Founder Thesis Podcast. We meet some of the most celebrated charter founders in the country. And we want to learn how to build a unicorn.
Evolution of Purchasing Models
00:00:33
Speaker
I still remember the first time I bought a Microsoft product. I had to go to a physical store and pay quite a bit for it. And in return I got a box the size of a dictionary with a CD inside it. But life has moved on. Today we no longer have to buy software. We just pay a subscription fee and the purchase process is no more than a few clicks.
Auto's E-commerce Experience
00:00:53
Speaker
Compare this with buying a bike. The two-wheeler buying process is still stuck in the past. You still need to visit a showroom, place your order with an upfront payment and visit the showroom again to get delivery. Most start-ups in this space simply connect you to a showroom near you.
00:01:09
Speaker
This is the market that auto is disrupting. Imagine getting the convenience of e-commerce and home trial and home delivery of a bike and imagine being able to pay a monthly subscription instead of an outright purchase.
Sumit Chajed's Background and Ventures
00:01:22
Speaker
This is exactly what auto is making possible.
00:01:25
Speaker
In this episode of the Founder Thesis Podcast, we speak to Sumit Chazzar, the founder of Auto. Sumit is an IIT Mumbai alumnus and a serial entrepreneur, with his previous venture being the used two-wheeler platform CREDR, which has raised more than $30 million till date. Listen on to Sumit's conversation with Akshay about finding opportunities and scaling businesses.
00:01:49
Speaker
Officially I started my first startup in 30 years of college. In 2011 was the time when I like officially got my name and started the first private limited entity for myself. This was analytic power private limited. It was into solar. Interestingly built this analytic power where the idea was to promote solar usage. So I was part of Tech Fest.
00:02:09
Speaker
which is the kind of technical festival of IIT Bombay. And in 2008-09, especially the theme around green became very strong, like the climate change problem covering up on the global stages. And that's how I started working, learning about the theme of that year for tech festivals, also very much around sustainability of the nations of the world.
00:02:29
Speaker
And so deep-dived into what are the alternate sources. And solar was something that picked us, picked our interest. And hence, we started just coming to promote solar technology, the usage of solar. So that's how we finally got it. What were you selling? Was it a B2C, B2D? What was it? What was the business?
00:02:49
Speaker
So there were two parts to it. Obviously, it's the award as we did it. So the first one was we worked a bit on the technology as a for innovations that we did. So I was in chemical engineering and my other partner was in engineering physics.
Innovations in Solar Technology
00:03:00
Speaker
But we both did some solar courses to just make sure that we learn and that's the confidence that IIT helps that it's open place. So if you want to do something when technically go to another department, do some courses and also learn and clear up for the future.
00:03:12
Speaker
So we did some courses, learned from on the sideline, used to do some R&D to a small lab and evolved on some products. So the idea was to solve. So all upon the starting point was that solving the heat demand in the smaller size factories, like someone who needs steam at anything between 70 to 90 degree, 95 degree Celsius, how can you use a solar platform combined with some electronics to give that kind of a controlled supply at general temperature.
00:03:39
Speaker
There were some solutions that we built across and then started promoting. And so we got certain interesting clients in and around which have always sung in Hyderabad. So we did multiple projects there, some projects in Thane. And it's a different space because it's operations-heavy. It's not just the technology. It's a proper EPC where you have to plan a project, you have to get the components, installation, servicing. So I learned a lot through the journey. So one thing I still make sure that I never demanded money from my parents.
00:04:07
Speaker
what is the teaching assistant at it can sing good grades help you in all this so i was able to get a role in a course and that use me on t to ten thousand i used to earn out of it and used to like invest this money to run my start up so it was easy because there are a lot of
00:04:25
Speaker
kind of demand and inquiry for those sessions from our side. So we've created a module in your way and probably we're running this product technology. Yes. Over time, how it evolved was that seeing technology had a lot of optics involvement. So there has been still a bit of a moment regulated.
00:04:42
Speaker
I'll say category where at least by 2011-12, it's not a B2C retail market product and realize that you need a lot of understanding to work with government and government processes and policies.
Online Education Platform Journey
00:04:52
Speaker
That's how this product evolved by doing this solar, which is our core. But since you're building this good platform where students can come, engage, learn and also do projects, can you open it for other horses?
00:05:04
Speaker
And then, hence, we reached out to some professors at IIT Bombay that, look, we want to democratize the resource by attrition that we had at IIT to a larger masses. And this will help India to learn and evolve. And that's how this platform became a kind of a product in itself, which we over time named it as Force Wave as a platform. And this Force Wave was something as a platform available for, on one side,
00:05:25
Speaker
prestigious professors to create courses in a bite-sized form, and then different students from different universities can engage in the courses, get certification, and they can learn to be a better engineer. So this is what you want. So this was something like an edX kind of an approach, like massive open online courses, right? Okay, okay.
00:05:43
Speaker
So we did this for roughly, I think, from 2011 to 2013. And fortunately, I got the chance to meet a veteran from Silicon Valley. And he was at IIT Bombay for a conference. And when I met him, he was very active in that tech space. I met him to showcase what we are building. And when I showcased this product, they liked it. And they offered that, why don't we make it global?
00:06:11
Speaker
So they love the whole kind of experience of the platform that you have built and the vision we have in the sector. Look, today with the growth of the Courseras and addicts of the world, universities also want to have their own platforms to bring masses towards their education. Essentially, they want to reduce dependence on them. Can we use this platform to be the channel for the university?
00:06:32
Speaker
Like a Shopify approach, basically. Okay. Got it. So that's what this offer to us. And I think just out of college, six months and getting this opportunity and working with some people, like the veterans who are sitting at Silicon Valley and have been the future builders of many technology, we took it call that at this stage, it makes sense to join hands and build this with them because then we'll get a news exposure and understanding. So we worked with that, this product moved just from an IT
00:07:01
Speaker
or India-centric to a global-centric. After this product was very global, we worked with them. We got excellent learnings because now we had one thing in Mountain View, people who have been leaders of engineering and technology and product at Visa, at different companies, joined us. We were running another team from 2025-odd in India who was focused on operations, content, technology building, etc. I worked with them for another 14 months. I skilled the product, product went global,
00:07:27
Speaker
What was the arrangement like UBK? Yeah, so our product got acquired by their company. Yeah. So they, so they used to. Okay. But they already had a company. They had a company course master. So the course master acquired course web and we became a. So they acquired the IP, the intellectual property. Okay. And as part of that deal, you stayed on. Yes. Yes.
00:07:49
Speaker
and continue to build the product there. Did you get money from these acquisitions, these two, like the renewable power one and the network? So it's a cash and stock deal. So we got certain cash, we got certain stocks in the global company as well.
00:08:10
Speaker
So, you had enough to put in the seed capital for your next venture?
Founding CREDR and Scaling Challenges
00:08:16
Speaker
Correct. So, again, this time also what we started born out of our personal experience. Again, coming from our tier 2 city, tier 3 city, big fan of tubulars. India runs on tubular. I have been seeing through my life that tubulars are the core and we have so many tubulars on the street and people
00:08:34
Speaker
As many as people buy new, there are many people who are buying second. This needs to solve. Today's platforms may be because of different reasons of focusing on the formula category. It is also huge, but it's not. From an impact point of view, it's not as huge as the two categories. And that's what intrigued us to say that let's take this up and let's solve it. We need to build a
00:08:54
Speaker
fulfillment platform in a used toolkit. A platform that stands for trust, transparency and convenience for the customer who is looking to buy a scanner. Did you want to do the inventory-led model like where you actually buy
00:09:10
Speaker
the vehicle and maintain the inventory of it, or did you want to do a marketplace model? So I think models are all evolved, right? So first point was that what is the problem I want to solve? So we thought on the solving of the problem. The first problem I want to solve is that
00:09:26
Speaker
As a customer, everyone is not an engineer and everyone has enough understanding to understand what is wrong or what is right. So the first thing was as provide customer platform where he can get multiple options. And these options are available with certain information, which is assessed by an expert who understand to a better engine.
00:09:50
Speaker
and the inventory that is put on the platform is available for it. So, two things that we face, right? One is to make a call to a person who is in the number 3 case. Second, equally, that's why he says, like, it's over two weeks back. Why are you calling now as well? So, getting this tip. So, one was making sure that the vehicles that are listed on the platform are available today.
00:10:08
Speaker
And second is that the vehicle listed have expert reports or reviews where they know what is this vehicle. If it is priced at 20k, why it is priced and is it the right price? If it is priced at 30k, is it the right price? So this is what we wanted to solve.
00:10:26
Speaker
Building supply, I think I'll come back to later that it's an evolved process. But the first one, this is what I want to solve. So what we did to build a quick inventory. We went to the dealers. So second-hand dealers in the market. So many mechanics over time evolved as a second-hand sellers because there was always a demand. So they put up a small garage and referred to it. We partnered with them. So we said, look, this is a digital world and today many customers are looking online to buy and we'll get you the presents. But we have two conditions. One,
00:10:51
Speaker
We need to know what vehicles are available as soon as the vehicles are sold, we need to know about it so that we remove the inventory. Second, all the vehicles will be inspected by our expert. So, we have a team of mechanics, our own independent mechanics, who will inspect the vehicle on certain parameters which are important and critical to see whether this vehicle is eligible to be even listed or not.
00:11:10
Speaker
And if it's listed, there's a score shrinking between 3 to 5 that occurs. So below 3, we don't even list it. Between 3 to 5 is what a vehicle will list it. So this is how we started. That every vehicle on the platform is curated, inspected by our persons. To a certain extent, we can create a trail about how the vehicle is foreign and the vehicle is available in the market. That is how we started the motor.
00:11:31
Speaker
And you would take like a commission from either the buyer or the seller that would be the earning. Would the garage guarantee you exclusivity? Because you are spending money on inspection. Now if he sells to some other person, then that money is wasted.
00:11:46
Speaker
You won't want to command it, but it happens only as you generate enough demand. So first is engaging. First is you engage him so that he feels enough value from the platform. And then over time, you go back and create larger books so that you get the priority in the system, right? So we obviously built it. So this is where we started solving the problem on the demand side. That's what we scaled up from three people.
00:12:07
Speaker
quickly grow to almost 100 plus odd team members scaled from one city to five cities. Tell me about this nature of ScaleUp. Was it 3200? Was it most of the people who were going out doing bike inspections? Or was it like what kind of ScaleUp were you doing? In what way? So ScaleUp were both sides. Obviously, I think it's an operational business. So you have people on the floor, on the ground who are going to run the show for you because every vehicle needs to be inspected and make sure that when the customer goes, you have a support team to help him out. So that is the experience is the key for him.
00:12:36
Speaker
And then obviously we built a very strong central team who had smart people from IITs, from IMs who were working with us and scrolling up the scale, technology, marketing, product. So we got some good colleagues from our side and some different systems. We built a very strong team. And also that team, that scale helped us in like doing a $15 million series in six months of the organization of this company.
00:12:59
Speaker
And by then, this was the largest city that would have happened in the country. Now, people are writing seeds, six or 50. But that is something that happened to us. Alternatively, we were able to scale up for six months. You had already raised prior to that? Roughly around half a million dollars from some of the angels, stable founders, Ganesh, Kei Ganesh, or Pickbasket. And they all came in and invested in us before that. And then, it is the sound of six months. So yeah, scale up happened pretty fast.
00:13:25
Speaker
Tell me the number of sales or like number of bikes listed or some number like to show customer traction. What was that like? It's been six months but we were able to quickly grow from let's say doing the first one we were doing roughly around let's say 30 odd vehicles and 30 odd vehicles we were started to doing roughly around 600 odd vehicle when we signed the term shift. So that's almost like the 20s growth in six months time.
00:13:49
Speaker
But from South Mumbai, we quickly launched Bangalore and Pune as well. So we were in three cities. So we could clearly showcase the ability of the team to scale it up. There is a good attraction happening on the platform. And I think it's also thesis, right? At the time, the whole marketplace models were interested for investors. People, investors, after-center flip cards and all that, they wanted more platform-led strategy kind of products or platforms to kind of invest in and be part of the journey. That obviously, the market sentiments also helped us in this.
00:14:20
Speaker
And then you would earn like 2-3,000 per bike or what like that. So scaling continued. We realize, see today, the supply is coming only from the dealer. So I limited that if my customer wants X and if my partner doesn't have it, then I don't have it. So then we went back to solve the supply problems for our dealers, that look how they get the supply.
00:14:41
Speaker
how they buy the vehicles in the market. And that's why we understood and we built the C2B side of it, where we understood that today in India, when a customer wants to buy a new vehicle, many of them, 30 to 40% has an old vehicle to exchange. So we built a platform where these old vehicles with people are coming for trading, basically giving the old vehicle and buying a new one. We built a platform where these vehicles will be sourced through our platform to our suppliers only.
00:15:05
Speaker
so that the suppliers can build, based on the demand projected, they can get the right vehicle in their region and then sell it, refurbish it and sell it to the customer again. So we built a full-stack model where we're helping these partners to acquire the right supply, refurbish it and sell it to our customer through a demand chain. So that's what we built across. And further over time, as we got more data, more skill, we realized that the second dealers are pocketed, right? And still, it's an O2 model, right? Where customer wants to see a bike at least once. So he needs to go there.
00:15:35
Speaker
So we did it. For example, there are a lot of secondary dealers and if you talk about Bangalore, they are in K.R. programs, but customers who buy new strollers are in Indira. So how can I serve them here? So slowly you open the franchisee stores where we said, okay, look, we'll have franchisee stores where even in the pockets where there is high demand but no supply bill, let's create the demand and supply centers here and work on it. So that's how we got into the franchisee piece as well. So that's been a
00:16:03
Speaker
How did you give out a franchise? Say you had these dealers, so this would be someone who would be like that dealer only, except that this was someone who was appointed and drained by you. That was the difference.
00:16:16
Speaker
No, we had a different concept. Obviously, this industry, you need to understand the industry, which we thought that obviously, considering now, auto has a full-stack experience. Can we enable financial investor to get excited to invest in this business? The idea was that you invest, we make sure that we train the team, the team you need at the outlet, we provide you the enough technology platform, technology access, so that you can get a certain assured return without much involvement of yours.
Consumer Behavior Shifts in Financing
00:16:45
Speaker
a bit more controlled experience to create because it's a very niche category. So you'll not get people to naturally understand this. And the idea was to basically give people an option to make good financial return on this kind of option as well. So we built a very strong SOPs. We built a very interesting trading systems and technology processes so that anyone even doesn't know through their business can start its own job. So that's how it evolved. So as a founder, I used to
00:17:12
Speaker
It was like become an entrepreneur. That was the pitch. Become an entrepreneur with credit. You will get supply from us. You will get demand from us. You only need to run operations and invest in inventory and invest that one-time investment in setting up the sector.
00:17:32
Speaker
So that's how it happened. And slowly, slowly, so I used to had product and marketing with the founders. So I used to have product and marketing. I, so I used to work on lot on the various initiatives, pilots, like we did bike bazaar, became a franchisee over time, C2B product, different channels we have built across. What we realized is one big thing missing in this category is the financing. So use to refinance will never existed.
00:17:56
Speaker
That's the first version. Imagine a customer not buying a new vehicle because he doesn't have money. So he is the most deprived person from a capital point of view and ends up going for a second bike and he's not getting enough capital even to buy a second one. So that's why we said it can provide access to financing option or capital.
00:18:14
Speaker
We can make it much more easy and convenient for the customer. So, always the focus has been how we can make customer lives easy and cut it, right? So, and that's where I entered in partner with Herofinca of just money. Multiple partners had brought in to also give access to financing that, look, we understand the tubular market. Even if something goes bad, we are here to kind of help you in liquidation and help you in logistics.
00:18:32
Speaker
And that's how we also launched the financing. And that was my kind of entry into the financing world, that how things have happened. And I did financing with different brands. These partnerships with NBFCs, was it like there's this concept called first loss default guarantee? No, no, no, this was not there. No, no. See, as a business, we don't understand what risk, right?
00:18:54
Speaker
You were just like a generic type. So we don't always nation. So it's an always nation. We do the process for you, but you take a part like that. We don't want to get into our company had a very different email. We wanted to stick with it. Just want to provide customer better access. You did want to get into the risk at the right time.
00:19:10
Speaker
part of it. Okay. That was the time. So three interesting things actually I learned during that phase of from late 2016 to mid-2017. So interesting shift rather while observing. One question quickly just to establish timeline. When did that 5 million series happen? 2050 around August.
00:19:29
Speaker
Yeah. So there's about a year after that, when you got into finance. Correct. Here we scaled it up. So here we scaled it up. We made this very interesting model full-stack platform, which was run by my other two partners. And I said, well, let's take some more initiatives that I don't use to do financing and like how great content to engage a customer, right? Because engagement of customer is very important here. He takes decision over weeks. It's not one-time decision. So if you engage customer platform, make it big and virtual, it's easy for him to trust you.
00:19:59
Speaker
like reviews correct user-based reviews and content around to make a right issue. We started there with a lot of traffic and idea will also can be monetized like Pulsar versus JAMA, IFCE and all the videos. So we did this interesting PDS. We also monetized that part. We worked with different banks and other brands to advertise on this platform because
00:20:18
Speaker
customer coming to buy a tool and they might need financing, might buy a new vehicle or my absence to get your brand. So how you can work on it. So I used to edit this project and the financing project. Do you think that kind of picked up for me as a shift happened? What were the numbers by that? Like you told me, 600 sales a month when you in that August, 25. So by this time, what would
00:20:38
Speaker
Now, by this time, we would mean roughly around 2500 odd numbers. Roughly that's the numbers if we started it again. And so that's the business scale we reached out to and roughly doing good financing numbers as well. Three things that kind of fit across by looking at brands and banks and all in the whole system.
00:20:56
Speaker
The consumer in the last five, seven years, during by 2017, from 2010 to 2017, we could see that an interesting shift is happening. That today's customer likes to change much faster. So, early generation, by a decade back, people used to use the same vehicle for six to seven years.
Launching Auto and Leaving CREDR
00:21:14
Speaker
They could still use the other platform, people are coming and changing vehicle after two years, three years, four years, and realize that today's customer liked changing it almost half a light cycle, which the others would be. That is one big change. Second,
00:21:26
Speaker
70% customers today want financing. So the new age customer, the milling and Z generation customer today is craving for optimizing the cash flow.
00:21:36
Speaker
Anywhere, if he has to invest more than 5k or 10k, he wants to not invest his own capital. He wants to get some access to finance, and obviously, the financing has become... This tie isn't easy. The consumer mindset has shifted from a savings mindset, he's moving more towards the cash flow mindset. That's been an interesting shift. The consumer is scaling for finance, more and more customers are coming for financing. So, I'll be at a new tool in the financing, credit is around 38%. Now, almost 65, 70% of people want finance. That's a big shift, right? It's almost double. Third hand being that
00:22:06
Speaker
Today's customer is digital savvy. This customer is comfortable buying an iPhone which costs like $70,000 or $80,000 by a TV which costs $30,000 or $40,000 sitting at home. So, this customer wants very low-touch, convenient option with commitment-free model. So, today's customer is digital savvy. This customer is ready for convenience. This customer wants commitment-free options where he's not too much involved. What do you mean commitment-free?
00:22:34
Speaker
No commitment to keep paying everyone? What does that mean? No, no. So what is the commitment? See, nothing should become a burden. Everything should be asset-like from a consumer point of view. If I have to use it today, use it, don't want to use it, can someone just take off the burden from me? As a customer, that's why the models are past 24 or 24, because people don't want to invest their time into it.
00:22:56
Speaker
Like people don't want to talk to 10 people and figure out who will get the best place. People want their, you give me a prize, they get half an hour, you bought the vehicle, it's fine. But I don't want to, so convenience is important. People that's not buying chocolate card, booking a cab, because the mindset is moving towards, I don't want to invest too much of my effort in something which is not my core likes. It's a part of life, it's not the core.
00:23:15
Speaker
This is not how I'm making money or bringing money. That's been a big shift we just want there earlier. So that's where we see that anything which comes with a bit of a burden or commitment is not something that raise customer life. If you don't have a choice, you have to do it. But that's not the preferred choice for the customer. Against what we're seeing, bringing in the ecosystem for so many years, we've seen that even buying a new tool,
00:23:39
Speaker
In India, it's still stuck in the 1980s. Just to put it up. Today also, as a customer, you have to walk into multiple shorom.
00:23:51
Speaker
Trices might be different at three different outlets, so you have to try three different operators of Honda and then Suzuki. The NPSs are slightly higher in the category, so you have certain NPSs banks sitting at the showroom, they'll provide you a whole loan option which is slightly costlier, still having a tubular as a secured asset at the back. Once you get the money, once you get the vehicle, your insurance, your maintenance, your resale, everything is your button.
00:24:14
Speaker
As a customer, it still comes with high commitment, highly offline, highly low high-touch model. It is still not digital savvy, low commitment, low cash flow, kind of a model. It's not there. It is still stuck where the product has evolved from my father's, the product technology has moved, but the process and the experience has not moved. And that's what we felt.
00:24:43
Speaker
It's a large ecosystem plate, where what straight out of it was doing is an excellent thing to solve a problem at the large, I'll say the leg end, that, okay, someone has used the vehicle and wants to sell how you help them in selling and get someone who wants to buy. But I realized that this problem has to solve across from the top of the funnel.
00:25:03
Speaker
where customers just thinking to buy all the vehicles manufactured and comes on the street, right? How you can make it a part of ecosystem where the integration is much higher for every button block. And that's what kind of excited us. And that's where I decided in 2072 to make an exit from Auto, and took a break for two or three months. And then along with my partner, we both started AutoCane in 2018.
00:25:27
Speaker
Harsh was with you in Kedav, he joined you. So Harsh and me, again, very interesting coincidence here. So Harsh and me both belong to Dapur. Both parents have a teaching background, but we never met at Dapur. We met at IIT Bombay during our graduation. He was also the same batch of 2012 as I graduated. And we became close-knit friends where you, in any college, make some 6M good friends that you trust, like anything else. We became part of it. And then, Harsh also worked and led some interesting projects at Dapur.
00:25:55
Speaker
So he was not a founder, but when we were scaling it up, we brought him in to run some interesting projects on data analytics and product that he led. So when I was thinking back of launching Auto, I thought about him. I thought let me discuss with him if he is like on board with the idea and the concept and then we'll be the best to work together.
00:26:14
Speaker
Why did you leave credit? You could have built this within credit also, right? It had enough money in the bank for these experiments. I mean, you already had sold the idea to investors, you had backers, you had branding, you had access to customers, you had access to partnerships. So why do everything in scratch?
00:26:34
Speaker
Correct. So, the two things are there. See, one, definitely while we did certain experiments, but there has to be alignment around what is the core of the company, right? And is it the core at which, because it's been on almost three and a half years by then, the core at which Redar was created, it was operation, customer expenses, what helped with the core, right? And when you're building something where financing is the core, the risk and liability is everything generated.
00:26:57
Speaker
I thought it's better to focus on one thing and build it with full conviction and setting it to both ends to the decision. You didn't sell your shares or anything. All your equity is still held. And how much stake did you have when you looked? You're not at liberty to say.
00:27:17
Speaker
No, I haven't. I haven't. Decent Stake, considering being a founder, I had Decent Stake and hosted Liquid. It dissolves and dilutes as investors come in, but I have Decent Stake, so I can't turn the numbers out, but it's not Decent Stake.
00:27:34
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion-dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts, and subscribe to the show.
00:27:55
Speaker
Okay. So then tell me like about building auto from like that, that zero to one journey, like you did once again. So did you first do fundraise or like, how did you go about it? So obviously now as we were building auto, right? So here the fundamental changes, right? It's a business where financing is the core. The extreme is digitize, which obviously you've learned the digitization, the consumer internet side of it, or they'd be know very well because we've done it different startups, but the building, the financing and money as a center of the business was different for us, right?
00:28:25
Speaker
Again, as I mentioned for us, it's not about doing a learning business or doing a second business, it's more about solving your problem. So if we think what customer needs today, so customer needs an option, we're sitting at a comfort of home, he can select any vehicle of his choice, he can take three home desk drives at home, so you don't need to walk into show me, get the best price for the vehicle in the market so that he's not worried about the prices.
00:28:46
Speaker
And here it's capital because 70% of people today buy on financing. So it's driving the financing where the option is much better than the market and how it is better than the market. So what auto will take cross for the customer is that as a customer, you can pay 230 MI for the two years. And at the end of two years, you can pay your 130 MI one short to keep the vehicle. You can pay 130 MI. Continuing paying is 130 MI for the next 12 months.
00:29:11
Speaker
Or you can say, I want to change, I've used it enough, I want to upgrade, I don't want to commit too much. So you come back to us, we help you in fine selling the products. So as a customer. But this was your idea from day one or did it evolve? No, no, this was the idea. From day one, the idea was the customer should have an option to commit to a vehicle for a limited time slip.
00:29:30
Speaker
It could be two years, three years, four years. It's a customer's choice. But considering we understand this asset better because of our experience of Granar, we can underwrite this asset better. So we can put up a value and say, look, at least this vehicle will have a minimum value of X after two years or three years. And hence, we give customer a liberty to not pay today. As a customer, you don't pay this money today. You use the vehicle for two years or three years, and then you decide.
00:29:54
Speaker
If you want to pay the vehicle, very happy, give the money and keep the vehicle. If you want to reuse the vehicle but you don't have money one time, because again, this category is cash. You can pay in the EMI or you can decide, I want to have now another vehicle. So this has been kind of a concept from day one.
00:30:10
Speaker
It's like a vehicle subscription basically. Leasing that is common in outside India never happened in India before and I think timings were just changing for us.
Auto's Millennial Focus and Market Strategy
00:30:23
Speaker
I think there's more and more today like 60% plus customers who buy it in the age of 22-35. So they are the millennials, these are nation customers.
00:30:31
Speaker
Again, for them, experience is more important than the ownership commitment to the ownership. So, that shifted up and cash flow became very sensitive point for them. Because if I'm making 20,000 rupees, I need to make sure that I buy a phone, I buy a bike, I travel with my friends, I give to my girlfriend. So, everything is important, right? So, people want to make sure that their EMI's, their monthly cash flows are best optimized for it. So, and it's the customer today voice to move away from offline tech as much as possible.
00:30:57
Speaker
So I think these were the great learnings that we had and that's what we built up on. Like as an example, let's say a bike costs 60,000. So a customer could pay off to his phone bank. So I'll tell you, I'll tell you, take a real example. Let's take an example of owned activity by a selling product in India. Basically it costs you around 85, 90,000 rupees. So what happens is when you take a normal loan from any bank or NPFC for two years, bank will say pay us 10,000 upfront, pay 4,000 rupees to monthly EMI.
00:31:24
Speaker
for next 24 years, 20 romance, and that's your vehicle, right? What happens with auto? Auto says, okay, pay up from 10,000, which is same, but now you pay only 2,500 rupees for next 24 months. And at the end of 24 months, you can pay the remaining money one shot and keep the vehicle. You can keep paying 2,500 for next another 12 months and keep the vehicle. Or you can just give back the vehicle. No question asked, you give back the vehicle and we will change and upgrade to another option. So as a customer, your EMI's, upfront EMI's have gone down from 4,000 to 2,500 rupees.
00:31:53
Speaker
As a customer, now you have a flight to really not commit today. After two years, you can commit if you want to commit more. And as a customer, you can do everything sitting at comfort of home, which never happened before, right? So you get the bike at the best price, you can do home test, right? And then get a financing, which is much more simple and affordable. So that's how this product has evolved.
00:32:11
Speaker
So, this convenience of home element is only if a customer wants to buy on EMI, if I want to buy upfront full, then I will not get that? No, so obviously, this was not there when we started. Obviously, as the time has evolved, we've also given that option to the customer that there are two pieces to it. It's a commerce-enabled finance product now where customer
00:32:31
Speaker
even want to buy a bike and so he can comfortably do it throughout a platform because he's getting the best option, best price and comfort and even if he wants financing then he gets away. So it's a coupled product since 7 out of 10 are going to apply so obviously financing is definitely bigger piece here but
00:32:48
Speaker
Now we have opened. This service was launched just two months back to open the service that even customer who is just looking to buy can use the platform to get the vehicle in a most current way. But like in the early days, wouldn't there have been misuse of people getting the free test drives and then going to a dealer and buying? Did you see that happening?
00:33:07
Speaker
Yeah, they'll definitely see. Indian consumers are always smart. So they are always aware of you in all the cases. So definitely you need to build the right hooks, right for the customer. And still there still will be some level of leakage, right? What becomes important that you need to learn and keep improving, right? What will not be customer to do that, right?
00:33:26
Speaker
So, for example, if you say we say we match the lowest price, even if you're getting the best price from the dealer, you come back with your better price for them. So, that even if it goes to the field, you'll come back and at least check out the other, you cannot get better here, right? So, that's the hope for it. Financing is the key. We make sure the customer does the booking, put some 500,000 rupees with auto and then he goes to the outlay.
00:33:44
Speaker
so that he is already committed to autoing the business. So, that's a second thing to take care of. And with a good experience, see what we have seen also, it's a shift, right? Obviously, I think 80% of people have moved ahead of it. They are not very much hesitant. They are hesitant to put much more effort to go to fail and COVID accelerated, right, frankly, after COVID.
00:34:05
Speaker
If you don't want to travel too much shopping on the slower road for upgrades, they might do the final check, right? So, they will book it and say, okay, on the side. Because India may find a tech vehicle or a home with the... It's a high involvement. High involvement and auspicious thing, right? So, it's a social booster. So, they want to go on a certain time and take it in every that we respect.
00:34:26
Speaker
It's that you won't have preferred choice time and preferred it, and it's all your fault. But before that, everything is closed for you. So you don't have a second thought to kind of try something different. So, and good thing is, your tip relative is still exclusive, right? No one has it. After even three and a half years, we can boast about it that the kind of concept that you build, the product that you brought in, the auto super EMI plant that we call, no one has it. Still no one has it.
00:34:52
Speaker
So even if you like it, if you are a young customer, imagine who is my customer, someone who is in the age group of 22 to 25, maybe 14, 16,000 rupees a month, already has some personal loans, some financial identities because of the family background. And then he says, okay, my AMI can be reduced by 1500 rupees, I can rather use this money somewhere else. So he gets a fork, my AMI is lower, more than just giving me this product, why would I move this online?
00:35:17
Speaker
See, imagine a customer just joined TCS, stays in Ralston, moved to Bangalore, new to language, new to city, don't even know how long he'll be there. And here is the customer option that buy from auto, city at home, very comment, use language, get everything, auto will manage your insurance, resell everything. If after two years want to move out to Hyderabad, you buy the vehicle and move away. Right?
00:35:38
Speaker
Progressive customer, commitment free model, no hassle offline, local language, problems, everything will be managed properly. So it becomes a very interesting choice for this customer. So our digital platform flexibility to upgrade or shift after some time and I think the best hooks that this industry can get right now.
00:35:57
Speaker
Okay, there are two aspects of it that I'm going to ask you about. I want to understand how the backend is stitched together, and I want to understand what is the customer acquisition strategy. So let's start with the backend first. So how do you provide the test drive at home? Do you have tie-ups with dealerships, and then you map them with the customer location? Or how do you do that?
00:36:21
Speaker
Correct. So essentially what you said is right. So obviously we have to build a model where we are more of a native and a ecosystem player rather than getting into the digities by ourselves. So considering we add a decent amount of business to our partners, so we have aligned them that you get for customer. Good thing in the Twitter categories, unlike cards, into where it's generally 65 to 73% of people we have observed know what they want to buy.
00:36:45
Speaker
They're more worried about the color, the price, and the availability of the stock and money. That is more worrying. There are 20 or 30% of people who want to try because generally, who buys a tubular? You already have a friend who has a tubular. Makes it one of you, asks why, because we say utility. Only a certain set of customers buy and grow with a passion. They also know that if an auto will give you 10 customers, maybe two of them will ask for a district.
00:37:10
Speaker
So, we have aligned our dealers in the nearest locality where we basically in the last takes around five to six flow meters, they will be helping in enabling the test rate for our astute. So, that's how the test rates are evolved. From day one, we knew that if you want to build this business, if they're scaling form, we need to be athletic on all the aspects. So, one is the showroom. So, we don't stock any inventory. These are the showrooms who have the stocks available. They have the team to provide the test rate. They have the team to do the delivery. So, they do it. On the other side, we partner with banks.
00:37:38
Speaker
How do you do the coordination? Does the customer get a call or does he have the ability to book the time for the test drive and all of that? Yeah, he can pick a slot and a date for booking a test drive and on a particular date and slot, he will get the test drive from us.
00:37:53
Speaker
And the showroom has an interface. So showroom has an interface and they manage it in good thing. It's not food. So even if there's a delay of 10 to 15 minutes, it's fine because it's not that your food will get cold or something. So the source is likely lower in terms of they will have one minute squad who kind of decide upon to get a test rate. So that's the platform provides on the dealer side to kind of put this through the app. That is the test rates are done a lot. That is something on that.
00:38:21
Speaker
As I mentioned, asset light was important. So from day one, we made sure that we have support and backing of various lenders.
00:38:30
Speaker
Because sales, the capital will become the biggest blocker for me, right? Because it's every vehicle, the customer, you need to put money for financing. So, we were very clear that we want to build this model scalable from both the sides. One is of the brand side. So, we partnered with both the brands, the dealers, so that they are stopping the inventories and providing the last mile logistics. On the other side, we partnered with the
00:38:56
Speaker
banks and NBSes. And we said, look, I have this customer who is generating income. He has some great history. And he's buying a two-wheeler, which is a 100% secure product. And I am here to liquidate and reseal in case that happens, if the phone happens. But I want him to refuse the capital and make a return off.
00:39:13
Speaker
I'm opening this retail segment of secure asset class for you to make money. And I'll manage the full life cycle. So from the organization of the customer, his underwriting, his delivery of the refill, repayments, resale, everything is managed by me. But you as a partner will infuse the capital because you are in the business of inducing capital.
00:39:32
Speaker
So this was no longer a loan origination, but this was, you were sharing this, like you would giving them a first loss default guarantee also. And the way you would earn that would be different.
Financial Operations and Risk Management
00:39:42
Speaker
Like in loan origination, you get paid some amount per loan. Here you get a spread like maybe like 5% or 8% or 10%, something that would be your nickname.
00:39:54
Speaker
Yes, so obviously the spreads are better but your involvement is also more but we knew this is core of this product because see when you want customer to have a very full satisfying experience on the platform, right? Certain visuals he needs to get on the platform.
00:40:11
Speaker
One is the vehicle which is buying, whether it's hitting the best price, whether it's getting the bike available in the desired time or not. And second, if it's applying the financing, if a platform says you get a financing, you should get a financing. So we wanted to make sure that the customer has the best experience because the best experience will pull the best customers towards us. So that's why this becomes important for us. And in the process, we also want to make sure that we are able to serve customers that we believe are the right set of customers to kind of underwrite. So here,
00:40:40
Speaker
Things say that we need to be very strong on our list. Underwriting, we need to be very strong on the collections. The core of the auto has a radius, right? So the teams, the...
00:40:50
Speaker
leadership team that works with us as founders as comes to that kind of experience, deep understanding of the markets, and that's how the business is born. So yeah, when we started this consulting, this has money involved with you. We have to raise capital because without your some base of equity, you will not have any bank or lender believing you that you can build something out of it. You will survive for a year.
00:41:11
Speaker
Obviously we did that so we at the night can see now we had a good history of learning successful adventures fortunate enough to get some good early backers so we got investment at the in adjusted business started a company in two months time we raised the capital. How much did you raise? So we raised four and a half CR this time just at IDSTH from some marquee angels who has
00:41:30
Speaker
been into FinTech and financial services and consummate rate industry. And then using this capital, we went to some of our learning partners that we are here to build this testing model. It's a new model for the first time. I really want you to back us. This is a very interesting Sinus wave. What is a Sinus wave? Sorry, I first have. I think it's like highs and lows, highs and lows that that has been part of this industry. Because when we started in 2018, if you remember, suddenly, September 2018, ILFS happened.
00:41:59
Speaker
that kind of shook the lending market, the MBF's capital dried up. And then as market was coming back, yes, bank happened in around that much. So I think that also helped us in building auto in a very sustainable and stable way. We were sure that how you give out the money is not important.
00:42:17
Speaker
How the money is coming back is going to be the most important question that anyone is going to ask you. And then slowly things got better. We got funding from IMHF partners around June 2019. That's where they came in. They invested one and a half million in the company. So that's a three round we did then.
00:42:32
Speaker
And by then, some good things happened for us. One was, we were very slightly clear about the distribution, about the kind of consumer who is coming to auto and who is referring us over the lending partners, others in the market. And hence, with this money, we got certain ability to scale up at a certain base. And lending has always been our vintage business. So as we also got some 10, 12 months of history, we also built confidence in other partners to start looking at autos.
00:43:01
Speaker
So fortunately with that vintage and with some more capital in the with us, we were able to get some new interesting partners to believe in us and a package support us. So that happened. We scaled from a fleet wing 20 vehicles a month to 100 vehicles a month and then COVID happened.
00:43:17
Speaker
Again, between the gears of getting up for fundraise, getting up to keep scaling, and then COVID hit us. When the markets even opened up in June, July, we were the first one to support our partner dealers in getting the business going. Because by then, frankly,
00:43:32
Speaker
Most of the banks and the PFCs had a very offline process where it didn't last. We've got a bank card copy or a document copy, signing. And by then, that was very worried to even touch a pen or touch a paper. So in that case, our digitized process where everything is digital, from your KYC to your underwriting to the signing of agreements, delivery order, everything is processed through an app.
Impact of COVID-19 on Auto's Expansion
00:43:53
Speaker
makes it very comfortable to the customer. He don't even need to touch another phone. You just put everything through your app and you get the bite. And he became one of the trusted partners for the dealer because he's able to keep selling whatever bites he put because Auto was there to help him.
00:44:08
Speaker
So, these things actually helped us very strong come back because what our relationship and connect to the partner became better. Suddenly, COVID pushed industry towards digital transformation. So, customers also thought, should I go even go to a showroom? Do I need to do that? Can I do sitting at home? So, that accelerated the digital adoption of our platform, our platform. And third, our performance. Just after COVID, the next three to six months performance,
00:44:33
Speaker
got every lender in the country to be interested to work with us. So, supply of capital, which was the toughest thing for us to grab before COVID. Fortunately, because of COVID, we came out as an outlier. All the fintechs got a hit and we also got a hit, but the level of it that we got showed the difference in way of sourcing the customer and the writing, it is able to keep the books healthy. And that's what
00:44:57
Speaker
Excited. Every bank that retails, secured as a class is the way to do, we should do. And there is someone who is building it in a very interesting way. Digital transformation is the future. We need to partner. And suddenly my whole capital satellite problem, which is the biggest bottleneck for my business board, became the least concerned for me from there. And that's how, from September, October, 2020, we started scaling the business again, reached back to our pre-COVID numbers in October in Diwali time. And then it's been an interesting journey.
00:45:27
Speaker
So it was 200 a month. Yes. So that's what we hit back in September, October. Then we've been scaling like from 200 to March 2021, we scale to from 200 to 600 numbers a month. And that's those numbers were something that, and obviously again, almost two years of consistent portfolio performance where NPS are under 1%, which this industry has never seen. And that's what excited the new funds to invest. So that's where Metrix partners are obviously in that our P series around and they invested into audio last year.
00:45:55
Speaker
So we raised total $10 million late last year. $6 million has came from metrics and then obviously our existing investors and some more funds a joint hands-on invested list. And we got some again really good marquee handles to believe in the story and again back us. So last year has been I'll say a fairly well for us because
00:46:15
Speaker
Second wave again happened but we were this time very much ready with our learning from the first wave improved on the process, improved on our underwriting, improved on our collection and showed clear results that when the second wave hit, our collection was hit by roughly 10%. So that also boosted confidence of the team that now after in 12 months even we have scaled up, we've been able to consistently do the right things on this spot.
00:46:38
Speaker
and post the fundraise, we start scaling up. So from three cities from March, we scale to eight cities now, roughly we are doing 2,500 numbers a month. So that's a decent growth, like from doing 500, 600. So the year end, if I talk about in January, 2020, we were doing 300 and 2021 we were doing 300.
00:46:57
Speaker
In December 2021, we did 2100. So that's a 7x growth. We have just seen in one year type. So that's a 7x growth of the business. $10 million of series, scaling up from three cities to almost eight cities. Now the playbooks are ready. The team has grown decently well from 60 people or team 10. Now today we are roughly 350 or team members and definitely scaling up well. So and the whole commerce, neighbor finance has picked up very strongly.
00:47:22
Speaker
At that time only, so we had two channels of distribution. One distribution is the showrooms because when we reached out to the brands and discussed the idea of auto, they said, look, this is an interesting platform and this is the future. We would like to be on your digital platform so that customers sitting at home can do everything. But at the same time, your financing is unique. And even today, the larger market is going to show them the buy and they should have this option.
00:47:46
Speaker
And they said, it makes sense. And now, even the customer walks into showroom, he can get an option to get a financing auto super AMP plan for himself. Or if it's sitting at one point, he should do everything, he can just use auto app to do it. So more than distribution system. So under our 20% business used to come to digital channel and 80% from the showroom. But with the expansion, with more product improvement and with the push of the COVID,
00:48:12
Speaker
We clearly seen that today almost 50% business now comes from auto and 50% from our Zoom channels. And that's an interesting shift because now that brings you on the table as a one-on-one partner, equal partner, because unlike other lenders and banks who are completely shiving on showrooms' ability to give them business, we are here actually adding business for them. We are actually, for every customer they are giving to us, we are able to get an additional customer for them where they just have to fulfill it.
00:48:41
Speaker
Your vehicle, your financing, everything is decided. It's just coming to take a delivery. And you're just servicing the customer and you're getting a good cut off. Amazing. Okay. So,
Dealer Partnerships and Revenue Models
00:48:52
Speaker
okay. I have a whole bunch of questions I want to ask you. Let's start with the stakeholder or stakeholder. So, let's start with the dealer or stakeholder first. So, like the dealer would share something with you irrespective of whether the load happens or not when you originate the customer, right? Like they would be sharing some... Yes, yes, yes.
00:49:10
Speaker
So when you see with us, it's a commerce model that we explain them. See, we are spending marketing dollars, we are spending on technology, we are spending on building that experience for customers to make additional buy by. So it saves you your effort also. So your sales, your operations efforts are saved.
00:49:27
Speaker
At least really do that, you are able to now sell at least 20-30% more than what you're selling, which means a faster replenishment of stocks for you, getting better down from your brands as well. So there's a lot of win that this business creates for you. And hence, there has to be some commitment
00:49:43
Speaker
sharing because I mean we are here to build business and not care to utility. So that has to be part of it. Dealers understand it's a business, they have the business mind, they're smart guys. So they understand, obviously they will negotiate hard on whatever they put but finally then they understand the value you bring on the table and they happen to work with you.
00:49:59
Speaker
And that's a percentage of sale price that you charge, or is it a fixed fees, like when you originate the customer? No, it's a mix. It depends on the brand and the models and dealers. So it's somewhere it's fixed, somewhere it's some percentage of it. So it varies. But that would, I'm assuming maybe between 500 rupees to 1500, 2000 rupees would be the earning there. Okay. So it's roughly around the later end, as you mentioned. So somewhere around that we charge. Correct.
00:50:28
Speaker
What is the way in which a dealer is onboarded? Is it through the brand where like say you tie up with a Honda, so all Honda dealers get onboarded or do you individually go to dealers and onboard?
00:50:38
Speaker
Yeah. So interestingly, when we started, it's a new model, it's a new business. So we have to definitely crack dealers one by one. So when we started Bangalore, we have to go convince dealers to understand and believe in it. And being somewhat totally positive, we knew that even if brands are convinced that dealers are not, they will not get the business. Because finally, it's their capital, it's their territory, and they need to firmly believe in the process of product.
00:51:02
Speaker
So we made sure that we work with dealers and what their feedback understood, why they love it and for some business done. And then using the data, we went to the brand because brands are already connected because of our credit experience. But we went to the brand later with some data points and said, look, this is what you've done in one city with certain dealers and see how the results have been processed. And now we want to replicate it to other places. And then it becomes easy, right? Because we have data, they can call the dealer, understand how's their experience, how's it helping and all.
00:51:31
Speaker
And once you have it, then you are aligned. So that's how it happened. And now it's pretty easy. For example, we have launched three cities in the last three months. So now it's pretty easy that all the brands recognize us. So we communicate to them. They align the regional team with us. The regional team sets up a Zoom call for meeting with their dealers to present our product.
00:51:49
Speaker
Again, now it's actually it's opposite now that we actually shortlist and say this first that, okay, maybe these are the places we want to start first because of the profile and all and then slowly expand to a different region. So that's a model where we already have some pipeline of dealers who are ready to get on board and we do it on a certain credit basis.
00:52:09
Speaker
You have a dealer app through which they can manage the test drive bookings and track customers and all of that. And for a bank, what is the commercial arrangement there? What percentage do they provide you funds at? What percentage do you charge customers at? What is the spread for you and all of that?
00:52:28
Speaker
So essentially, we charge it something which is roughly the market rate today. So roughly in India, two year financing happens at around 20 or 22%. So 20-22% is the market rate. So we also fund the customer at the same rate. And cutscene, we
00:52:44
Speaker
We manage the full lifecycles right from the visionation of customers who is underwriting, who is repayments and then resale. Everything is managed by autos and without a sharing of risk as well. We expect to make some decent money on it. We wait roughly 8-10% for ourselves so that we have a
00:53:01
Speaker
and I think the banks and lenders are smarter. They also know that the buyer will not make money this much and they will not survive inside stores. The idea for them is also to get a return which makes sense for them. At the same time, the partner makes the return which helps them in following the show as well as makes the profit. So that's how the models are built. And now we're adding roughly one partner every quarter.
00:53:23
Speaker
So we already have like access to 300 crores. That's a mandate actually. We haven't got a mandate. You have to disburse 300 crores in this calendar year that we need to do from our partners and the idea is already placed. We are scaling up. Commerce is something that we're looking very strongly now because with EV coming in, many of the brands don't even have a luxury of offline dealer channel. So the auto is becoming a go-to platform where consumer can
00:53:49
Speaker
come and discover the vehicle, take a test ride, apply for financing, and get the booking done. So the idea is to provide being paid at one platform, which helps customers. So we have, interestingly, we have verified reviews. So we have reviews from the experts. We have reviews from the users of the bike because we already have three years of customers that they talk about their experience at these small bite-sized reviews. Video reviews help consumers in understanding first which product is good for them, then take a test ride if you want to, or apply for financing.
00:54:18
Speaker
and true financing at the booking deck. So the idea is to enable a very seamless experience for customer from the discovery to the financing. And it doesn't end there, putting our commitment towards our customer is locked up. Even after the customer has bought a vehicle, his insurance, his servicing, his resale, he can manage everything through Auto App. So Auto App provides, becomes a one single stop for him to do everything for his vehicle. Essentially, we make your commitment our commitment and make your life simple. That's the idea.
00:54:48
Speaker
Okay, so does the bank also do like a approved reject on that whole process is managed by you and bank just gives you a like a line of credit in a way like like they will say okay you have ticket load available. Yeah, so how it happens obviously we have so it's an infrastructure that we have built at the back end where any lender any NBSC wants to plug in and let's say allocator started capital they can do it and at the same time they can also
00:55:13
Speaker
create a credit engine which synchronizes our engine. So, we have the credit engines which synchronize with our partner's engine. So, when we approve, we know for sure that which partners are going to reject or which partner will be accepted and that helps us in making. So, to answer you, they don't get involved in a day-to-day, every-case basis, because that's what we do. But our engines are aligned with theirs so that any hard triggers of rejections are mandated, verified, and understood before we do it. And then we have multiple partners do that.
00:55:39
Speaker
What is also happening now is that I think Google is an interesting space. Many wants to enter or don't even understand it and they now go with the experience of auto in the last three years. The great truth is that you have built and your assessment is right and we will give it as using the same because you have more experience than us. Many MVPs won't understand this category well.
00:56:02
Speaker
So, in that case, they just adapt to our engines and start working with us. In some cases, they have their own experiences and they have their own engines and we synchronize and make sure that it's a seamless process. So, for a customer, approval for water is an approval. You doesn't need to worry about the final feedback.
00:56:18
Speaker
Right. So has this allowed you to move below the frame now? Because maybe there would be some lenders who would be comfortable with more risk. Correct. But we are not. So if we are not, then we won't do it. But having said it, definitely it's a learning and
00:56:34
Speaker
And yes, we need to be realistic to the market as well. There are customers who seek option of auto and it's not able to solve them. It's also a failure for us. So we want to serve as many as possible. We have a separate risk advisory panel, which are some senior veterans who are headed.
00:56:51
Speaker
been the risk department heads for bigger company CEOs for banks. So they oversee every quarter. We take some experiments to pilot on certain categories, certain criteria, revisit the performance of those portfolio. And if it looks good, we keep evolving our credit engine. So idea is definitely with time with obviously permutations of data and ways to keep opening the gates for more and more customer to become part of it.
00:57:16
Speaker
How do you do collections, like digital collections?
Customer Engagement and Retention Strategies
00:57:20
Speaker
Yeah, yeah. So the customer that we want to get is a digital savvy customer. As I mentioned, he is a digital savvy, which means he has a net banking, his UPI, his MXS. So our customers, 100% customers, activate the NASH, instant NASH. So before the delivery, the NASH are activated, so auto debits are in place and auto debits happen. Good thing which also happens with us actually, one, that connection itself is unique because
00:57:43
Speaker
While there are four banks who have the same product, but you have a unique concept. So if a customer likes your concept, he comes to you and you have a better chance to say if you want to fund him or not. For others, everyone is seen. If you don't do it, someone will do it. So you have a rush to compete there. So we get a good customer profile. Second is that the customer which comes to auto, even is not able to pay. For practical purposes, what has happened in India is that the tool category, while it's an asset at the back, banks and businesses don't treat it as a secure asset.
00:58:11
Speaker
That's why the rates are almost like personal loans. Then yours are also like personal loan because bank don't want to get into this headache. But the product of auto is built by default with the virtue that you have an option to come back and give the vehicle and we have an infrastructure to liquidate it. So what happens when a customer defaults with auto?
00:58:29
Speaker
We just try to establish a contact and understand that what's the problem, what's the challenge. And if you're not able to pay for next three months consistently, we'll pick the way to buy. We will liquidate it on your behalf because we have a good network. And if you make some money, we'll share with you as well. But at least we'll make sure that your loans are closed, right? So that connect and comfort that you build for the customer helps you and the customers. Let's see, in India, we've seen that in many 80 to 85% of people are genuine. So someone who is at the age of
00:58:58
Speaker
23, he just started a job of 18, he's optimistic that his life will get better. And suddenly, some of his family gets some medical emergency, or he might lose a job because of some medical suspicion. He's not aware, he's not even thought about it. So he's a
00:59:13
Speaker
genuine customers went through some impact which changed his ability to pay, but he is genuine. He is not in a mindset or intention to default. So in this case, you are able to build a connect, give him comfort, get the vehicle, liquidate it, pay the money, close it. So that's another big reason why we've been able to keep our collection really good.
00:59:32
Speaker
And your liquidation is through Kedar, I'm assuming. No, that's one of the challenge. So, we have a limited scale. We are working with some small dealers. Obviously, with time, as we scale up, that if we have partnership with them also, we'll chime today. We have roughly because we don't have enough supply even to the effect of the market. So, we work with some limited local dealers who are able to kind of absorb it today from our side and do it. But again, there's also a bidding system. We have three, four,
00:59:58
Speaker
The part time page on the vehicle, the one is the highest price kept the vehicle and for us. Got it. Okay. Okay. And so let's talk about your customer acquisition. So like when you started, it must have been different because at that time you did not
01:00:14
Speaker
You were not doing the commerce model, you were doing the lending model. So what was your ad like? Was it like buy two wheeler on EMI, buy wheeler on easy EMI? How did you acquire customers? So our hit has been very simple.
01:00:29
Speaker
get your bike at 30% lower EMI. And that's big enough fool, right? If you see a advertised where you say that you're EMI, it's a low EMI. We're very terrified that it's not less, it's a low EMI. So you pay 30% lower EMI for the first two years and then you decide.
01:00:46
Speaker
See, if you are looking to buy something and you see that 30% low, you will at least come and try. So that's a clear tool for us. And I'll tell you some interesting data point. This is a data by Google India report. 92% of people who buy a tool in India, whatever data they surveyed,
01:01:01
Speaker
I started the journey online, where they started either with some basic inquiries, the nearest dealer, best price, best financing option, loan rates, documents for loan. They started the journey online, and 90% of them buy offline because there's no option. And this is what we also understood over time, as you asked. So earlier, we used to generate business for our financing code. Okay, I want to disburse finance to the customers looking to buy a bike in an auto-scoring app. That's how we started.
01:01:28
Speaker
Over time, our data showed that 73% of people who came to Auto Platform and Weblight financing booked a vehicle online. They didn't even care to move the show.
01:01:38
Speaker
And that's how we built upon it. If we can build a more engaging commerce play to it, where customer is able to discover all the bikes, take a test ride and do it. It'll become much more interesting for customer. And you understood customer wants to see things. He wants the best price for the vehicle. He wants to try sometimes a vehicle. He wants the availability of stock of my color.
01:02:01
Speaker
in the delivered time, right? Then whatever due time you assure it, that you should happen. Like transparent information. These three things he wants, right? If you provide this, and if you want financing, then financing is obviously you already have as a core. But apart from financing, these are the three things he needs. If you are able to provide this to platform, there's no reason for customer to go to the shop. Before looking for delivery, yes, he still goes because that's an auspicious thing. People like to do that by themselves, but at least he doesn't need to go to show room before he makes, to make a mind of what vehicle he wants to buy.
01:02:31
Speaker
So that's the kind of evolution that has happened. So simple, our ads have really interesting CTRs because it's a very clear, relevant, helpful information for him to absorb and come to us. And that's what it started. By CTR, you mean click-through rate? Yes, click-through rate.
01:02:48
Speaker
What is a good CTR just for people who don't know? See, every industry has a different CTR. In our industry, anything between 0.8 to 1 has been good. And we have been able to keep it to 1.3 to 1.8. So that's what the kind of... 1.8%. Correct. So that's a very good CTR rate for this. Do you still advertise that lower EMI? Is that still the pitch or is it because now it's commerce also?
01:03:17
Speaker
So obviously now we have multiple pieces. One is like get a test rate, free test rate at home to drive a vehicle, get a bike at the lowest price on the platform, get financing. So you have like pay to 30 MI and then pay one to later. So we keep doing different mixes for customers with WebSoft and come to it. But yes, now, as I said, funnel has definitely gone wider where customers can enter a different point. If you are looking for verified content to decide
01:03:46
Speaker
or filter your vehicle choice, you can enter auto. If you have just have decided to achieve vehicle but you want to do some known test rate before you want to go further in the process, you can book it auto. If you have decided the vehicle and you want to get financing, you can come and start the process. So now customer can inject into the auto ecosystem at different points in design.
01:04:06
Speaker
And so you said that you charge something to make sure that you are reading out frivolous customers. What is that like? So essentially what we do is, so when a customer comes and completes the journey, right? Once the journey is completed, you got the approval. We make sure that we get it is getting money from the Indian consumer is the final benchmark or a milestone of your success on the transition. So make sure that when the consumer goes to auto channel,
01:04:33
Speaker
We make sure that we at least get four 99 or triple lines from the customer on the platform itself so that now he is completely serious about his decision to buy. So we just do first like 1000 rupees, getting a customer intent in India, if you get 99 out of him, he is here, right? That's the way it is. So we just make sure that he pays that initial booking survey. Basically, that is a trigger that's a business amount assigned or aligned.
01:04:58
Speaker
showroom at your place and align the delivery of the vehicle. So you need to make this paper. And that's what triggers or shows the intent of the customer to buy. That's like a refund adjustable booking amount, something like that. Yes. It gets adjusted against that ticket.
01:05:13
Speaker
But wouldn't there be a case? I'm imagining like new bike. I want to test drive it. Just shock it. Not that I want to buy it. So as a case is with the hotel. Correct. Our idea is they're supposed to test rides. If we want to test the hotels, we might ask for a 99 rupees price for a small token from the customer in case he does it. But we have seen people generally take one or two test rides and make a move. So yeah, some of them not buy. That is fine. But I believe that's a loyalty and engagement you've built over the years.
01:05:41
Speaker
So, and you said that you are with the customer through that entire life cycle with other services. So what like you have buying insurance policy and like, so how are all of those other things done that like you have a collaboration with, are you an agent yourself or you have collaboration with some insurance company?
01:05:59
Speaker
No, we have collaboration with the partner right now. We can scale differently. We'll take the necessary routes. But right now, we work with like a company broker or something like that. So over time, we'll do it. But right now, a good thing is understanding the customer is from day one with auto, we are collecting monthly emails from him.
01:06:17
Speaker
So we know when the insurance is going to expire so we can immediately get him into the insurance plus our insurance he can pay over EMI so you don't even need to shell out this cost one time you can just increase the EMI by 50 rupees and or 100 rupees and his insurance gets covered so it's very simple and easy for him. So insurance renewals we also partnered for pick and drop service feature where customer needs available maintenance of vehicle can be picked from his home.
01:06:39
Speaker
service at the garage and I mean job rent is home or at office, wherever you are, makes your servicing also easy, right? So, the idea is that in provide customer as a venture, the monthly simple, 10x simple way to buy a financial loan of dealer. What is your current split between organic and like acquired traffic or leads? So, organic is around 30-35% for us and remaining is acquired. Got it. Okay. So, and for servicing, you would have like again tie-ups with these same dealers only would be doing servicing so that
01:07:09
Speaker
dealers are there, both dealers are there, then now they are doing it as well, who also provide the service. So both of them are there on the platform. And so like help me understand from a scale perspective, like you're doing 2500 bikes a month. What does that mean? Like, how much would another two wheeler financing company be doing there? Like just that perspective.
01:07:30
Speaker
Yeah, so frankly, we are just scratching the surface, right? So it's a huge market. In India, roughly 20 million new dealers have sold, right? It's a $20 billion market industry.
Auto's Position in the Market
01:07:40
Speaker
50% of finance, which is like a $10 billion industry, right? In $10 billion, even doing 25 million a year is scratching the surface right now, right? So we are definitely small. Obviously, good thing is in the cities where we exist, we have a good share.
01:07:56
Speaker
With the partners we operate, we have shared anything between 18% to 30% is our financing share. So that's a validation for us that work with partners, limited but real intensity of business so that they feel value coming from us. And also this validates that there is enough demand for our option in the market, right? When there are five, six players, yet you are able to command 31 third of the market share or one fourth of the share. It means you have something interesting for the consumer as well as for the partner.
01:08:25
Speaker
And so I think probably after speaking to you, what realization I come to is I think the way to do e-commerce for vehicles is probably this, where there is a financing led approach, which is helping you make majority of your income instead of trying to make income through commissions or through listing fees. Yeah, this is an amazing insight. This probably would also apply to a lot of other industries. I'm imagining even for real estate, this is a much better approach.
01:08:55
Speaker
Yes. Charging for listing, make money through financing and that subsidizes your commerce play. Amazing.
01:09:04
Speaker
Okay. So why did you choose auto? I mean, it's such a confusing name. Whenever I see it, I want to say auto, but then because you said auto so many times. So now I'll maybe next five times I say, you know, I'll get used to calling it auto. But so I think the name has always been interesting for me. I like, it has to stand for something. It has to be some part of the philosophy. So auto has come out of ownership together.
01:09:29
Speaker
So it's about let's phone together. So as I mentioned, we are here to take some commitment of yours to us and it's how we are part of this journey. So yeah, that's how the vision lies in the name. And one thing, by the way, is that the industry, it's relevant. It makes it also very relevant that you are in auto category. It also resonates to your industry when you say auto capital, which is a financing arm. It should be related to automobile categories. So that's how the name is kind of pointed.
Future Funding and Growth Plans
01:09:58
Speaker
So what's on the roadmap? Are you looking to raise more? See, obviously, something we have done of fundraise last year, we are well capitalized, but as the missions are bigger and ambitions are also higher, we definitely want to now reach this opportunity of being a leader in this category. And to do that, yes, maybe another quick fundraise would definitely help us in like going more aggressive to the market and investing more in the commerce experience, investing more in the building the scale, getting the right technology up.
01:10:27
Speaker
Okay, I guess the next round would be like a 40-50 million round, right? Because you've already done 10 million, so doing anything small doesn't make sense.
01:10:36
Speaker
No, I think so. I'll tell you another thing. It's a learning as an entrepreneur a few times. And now I actually prefer raising in a small splits way because as I found it, you're always in the pressure to deliver, right? So raising optimal as needed by the companies on your realistic projections, realistic need once you raise because that keeps you away from the huge pressure of delivery. So.
01:11:03
Speaker
Getting into the game of valuations, getting into the game of fundraise is always exciting as a founder because you have the highest stake here, but it sometimes gets you into much of pressure of delivering and you might miss on some of the cores of business which are needed for sustainability. Are there any acquisitions on the card? I mean, for example, acquiring a site which does content could be a good play for you to do, like content-focused businesses.
01:11:31
Speaker
So far definitely we are not about it but yes maybe post and other fundraise we might start looking at some growth hacks obviously in which some as you mentioned as you are enabling the commerce side of it maybe a idea to acquire someone who has already created the good
01:11:48
Speaker
leave it on the content and if you can leverage it to build more traffic for you, it could be on the cards. Maybe a financing entity which already has built a good books and might look as a good equation for us to strengthen our lending side of it could be on the cards. Something which could be done on the ownership side with the EV coming in, charging infrastructure, charging stations could be on the other side to look at it.
01:12:10
Speaker
As of now, we don't have anything right now. The focus is to just focus on this complete commerce, stable finance piece and make people the leader. And yes, with the next five days, we might open some strategic kind of module, integrate some startups or pick some good startups in this category because any of you want to be in the ecosystem here. So that might help us, but right now, nothing will pass.
01:12:30
Speaker
Got it. Okay. And what is your roadmap for four-wheeler? Like you would, I mean, I'm guessing if you're building a platform, it makes no sense to restrict it to only two-wheelers, right? Very fair. So I'll say the idea is, at least for the next 18 months, just focus and create a leadership here and fill the best product experience like that. Yes. We want to explore other categories because just to share an interesting insight, many times the one who buys a two-wheeler, 10 to 15% people buy a four-wheeler as a next vehicle.
01:12:58
Speaker
So there might be naturally, if I have half a million users, there will be naturally 100,000 users who might be looking to buy a car now. And again, if they've already got the best experience of ownership through auto, why shouldn't they go back to old school approach of ownership? It might make some good sense to be with us.
01:13:14
Speaker
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