Providing credibility for used cars

The used car scene will never be the same again. With Automartindia Ltd., a joint venture between the Mahindra group, HDFC and Sah & Sanghi, launching its hybrid model of portal cum retail presence in a big way, the used car business is set to achieve a degree of stature and credence that was never there before.
 
No more the dusty stack of cars at the roadside dealer, or the niggling doubt at the back of your mind as to whether the car you just bought was a good deal or a sneaking con. No more the fear that the inevitable path after a second hand car purchase would be to the nearest garage. Automartindia has simplified the process of buying and selling used cars, giving the customer a good choice and providing a level of transparency and credibility in the used car market.

According to senior officials, the company is offering the used car customer a value proposition and a choice of vehicles, transparency, and assurance.

While the launched its web version of the used car market place, automartindia.com in August 1999, it followed this up with a physical presence with a retail outlet in Mumbai in April 2001. With five company outlets to date - in Mumbai, Delhi, Chennai, Bangalore, and now Pune - and a planned 48 in three years time, Automartindia intends to lead the market in the used car business.

For now, it is the only brand-neutral used car initiative in the organized sector that intends to go national, and the only one with its hybrid model - online and offline - of business. Although Ford had forayed into the used car business over a year ago selling through its Ford Assured dealerships, and had professed to be brand neutral, there has been lukewarm response.

"The difference is of focus," says Mr. Sanghi. According to him, for the likes of Ford, it can only be a side business, in as much as it helps them sell the Ford brand of cars. For Automartindia, on the other hand, used cars are its only business, hence all its efforts will be centred around offering a wide range, and meet every customer's requirement for such a car - make, model, price, service. "Their core competency is in new, ours is in the old," he reiterates.

This kind of focus is to be translated through the infrastructure that the company will provide for the products, and the services that go with it. The outlets, for instance, are to be large, modern and inviting. Each outlet will be about 20,000 sq ft, comprising of showroom and stockyard, with capacity to accommodate and display 100 cars at a time. It will have the right ambience and amenities to attract the whole family. "A car is the second most important investment for an Indian family, after a house," observes Vivek Kumar, manager, marketing. Thus, apart from the pleasant surroundings that would be laid out for prospective customers, the amenities will include an area for kids to play while their parents look for a good buy.

That's for atmosphere. For every vehicle that the company would be selling, it would have carried out a full document check complete with RTO extracts, accident history and insurance records, a thorough vehicle checking and evaluation against 118 parameters on the components, mechanism, body and upholstery. The vehicle will be fully overhauled and refurbished before being sold, so that the buyer will take home a valued means of mobility rather than a liability. Financing options too will be made available on the premises, so that each vehicle would come complete with a makeover, financing, certification, online registration and a six-month or 8000 km warranty on the engine, gearbox and transmission of the car.

With all these measures, Automartindia hopes to restructure the used car business, and infuse credibility into a market that is now fragmented, has an unorganised and disparate body of brokers and dealers, lacks transparency, and has no benchmarking system to evaluate its products - which Automartindia hopes to re-write.

With an estimated market size of 1.2 million cars annually, twice the size of the new car market, the potential is unlimited. Fuelled by factors such as increasingly shortening life cycle of new cars - from 15 years a few years ago to six years now -- and getting shorter by the day, a range of new models cars coming in every day, and the increasing number of people aspiring to upgrade from two to four wheelers, the expected annual growth rate is a promising 15 to 20 per cent.  "Forty per cent of all new buyers need to sell their old cars," says Mr. Sanghi, pointing to the possibility, and the need for an organized market player.

Automartindia, whose online and offline presence complement each other - the online mode helping to disseminate information and the offline in fulfilling queries, has an inventory of over 7,000 vehicles and an 80,000 registered users on its online mode. The company has recently tied up with Hyundai Motors for an exchange programme, where Automartindia would function as Hyundai's official partners to check, evaluate and buy the used cars for Hyundai.  With this, Automartindia has introduced the concept of a 'buying house' in the used car market, and is in talks with five other leading car manufacturers for similar programmes.

The company has invested Rs 25 crore in the business thus far on its combination of offline and online infrastructure. It expects to achieve a turnover of Rs 125 crore in the first year, and break even by October this year. At the end of three years and 48 outlets - 26 of which it would own, and 22 be made up by franchisees - the company hopes to have sold over  40,000 cars and achieved a 7 per cent market share in the used car market.