Cars24 Business Model: How Does Cars24 Earn Profit?

Cars24, founded in 2015, is a technology-driven platform revolutionizing the buying and selling of used cars in India. It provides a hassle-free experience for customers, leveraging its proprietary technology to offer seamless services. The company operates primarily on a C2B (Customer-to-Business) model, where it buys cars from individuals and then resells them to dealers or directly to consumers through its platform. With its roots in India, Cars24 has expanded to markets like the UAE, Australia, and Thailand.

Cars24’s Business Model and Revenue Streams

Cars24’s business model revolves around the sale of used cars and additional value-added services such as financing. The company’s primary revenue sources include:

1. Sale of Used Cars: Cars24 buys pre-owned cars from individuals, refurbishes them if necessary, and sells them at a markup. According to reports, nearly 96.6% of its operating revenue comes from this activity. The company’s ability to inspect, repair, and certify cars helps increase their resale value, ensuring profits from each transaction.

2. Financing Services: Another significant revenue stream for Cars24 comes from its financial services. The company offers car loans through its financial arm, Cars24 Financial Services. These loans allow buyers to purchase used cars with ease, and Cars24 earns interest on the loan amounts. The financial services division has grown rapidly, with disbursed loans crossing ₹1,000 crore in the last three years​.

3. Commissions and Fees: Cars24 also earns revenue through commissions on every car sold. It charges a commission of approximately 4-5% on each car transaction. Additionally, the company charges a registration fee when listing cars on its platform, which contributes to its overall income​.

4. Other Income: Apart from its core business, Cars24 generates some income from interest on fixed deposits and other financial instruments. This amounted to about ₹34.7 crore in FY22​.

How Does Cars24 Ensure Profitability?

1. Use of Proprietary Technology: Cars24’s advanced algorithms and artificial intelligence help in accurate pricing and car inspections, allowing them to buy cars at competitive prices and resell them at a profit. This technology plays a vital role in maintaining operational efficiency and reducing errors during transactions​.

2. Refurbishment and Certification: The company inspects and refurbishes the cars it buys, ensuring they meet high standards before being listed for sale. This boosts consumer confidence and allows Cars24 to sell cars at higher prices, which increases profit margins.

3. Wide Customer Reach and Convenience: Cars24 leverages both online and offline channels to engage with customers. Its website and mobile app allow users to sell or buy cars from the comfort of their homes, while the physical branches let customers inspect vehicles in person. This hybrid model enhances customer experience and contributes to higher sales​.

4. Partnerships: Cars24 has strategic partnerships with car dealerships, non-banking financial companies (NBFCs), and car refurbishing centers. These partnerships enable the company to maintain a steady supply of cars, provide financing solutions, and ensure high-quality vehicle offerings​.

Financial Performance and Challenges

In FY22, Cars24 reported a significant surge in revenue, growing by 116.6% to ₹5,868 crore. However, the company also faced rising operational costs. Its largest expense was the purchase of pre-owned vehicles, accounting for 76.3% of total costs. Other expenses included employee salaries, refurbishment costs, and advertising.

Despite impressive revenue growth, Cars24 recorded losses of ₹1,834 crore in FY22, primarily due to high operational and expansion costs. The company is working towards profitability and expects to break even by FY25 as it continues to scale and optimize its operations​.

Future Outlook

The used car market in India is projected to grow significantly, driven by factors like affordability, rising demand for personal mobility, and the shift toward digital platforms for buying and selling vehicles. Cars24 is well-positioned to capitalize on this trend. With its strong technological foundation and customer-centric approach, the company aims to continue expanding both domestically and internationally. Additionally, Cars24 is investing in newer markets and enhancing its financing capabilities, which are expected to contribute to its future profitability.

Conclusion

Cars24’s business model, which combines the sale of used cars with financing and refurbishment services, allows it to generate significant revenue. While the company has faced challenges in achieving profitability due to high operational costs, its strategic use of technology and partnerships position it well for long-term growth. As the used car market continues to expand, Cars24’s focus on customer convenience and innovation will likely drive its success in the coming years