The CarWale ride

When Mohit Dubey was raising money for his startup, Automotive Exchange Pvt. Ltd., the parent company behind CarWale, he wanted to build a business around used-car price guides. He was going after a business similar to that of Parkers in the U.K. and CarFax in the U.S. It was a model he conceptualised based on an observation that used-car buyers had no clue whether they were paying the right price for a car.

However, his angel investors, the Mahesh Murthy-led Seedfund, wanted him to pursue a business around auto classifieds, an online portal where car buyers and sellers could meet. Both these models needed different operational efforts, but the startup was focused on a particular target market, a used-car buyer. Dubey gave both these ideas a shot.

However, as his entrepreneurial journey unveiled, CarWale went through several transitions. The end result: today, 80 per cent of its revenue comes from transactions around buying and selling new cars, not the used-car market he was going after.

Plan A: Classifieds vs. used-car price-guide

Dubey says, “Used-car buyers always had several questions. ‘Am I buying at the right price? Is the interest rate for my car loan the best deal available?’” It is providing answers to these questions that Dubey wanted to offer with CarWale. He also wanted to build a used-car price guide for buyers. After he raised his first round of funding, classifieds was the other business he was going after.

At that time, around the world, most successful auto portals relied on the classifieds model. Connecting buyers and sellers, and generating revenue from classified advertisements worked. But for some reason, it was not taking off in India. Dubey says, “At a broad level, the number of used-car transactions in India was extremely high. But it seemed like the market was not ready for online classifieds. Additionally, India’s new car market was growing faster than the market for used-cars. So, we thought, why not go after facilitating the sale of a new car?” He was onto Plan B.

Plan B: Lead generation for new cars

Dubey, then, met with new car dealers and said he could generate leads for them and help increase the number of transactions they made. However, dealers were apprehensive. “They were getting enough walk-ins and for some brands, the wait time for a car was three to four months.”  Since dealers were not very responsive, he approached car manufacturers directly. That did not work either. Manufacturers would anyway pass these leads onto a dealer, who was not interested in these anyway.

Plan C: A car manufacturer’s marketing partner

Dubey had a problem. He went back to the drawing board and thought, “My focus is to help a consumer buy a car. Let me hire my own people to manage these leads, fix test-drives for prospective customers and complete the whole transaction.” By doing this, he was also solving a problem for the car manufacturer, who did not have anyone to act on the leads generated by Dubey. The difference between Plan B and Plan C was that CarWale was no longer just a lead generator. It wanted to assist customers in buying cars. It setup test drives, helped negotiate the right price and even gave feedback to manufacturers.

Today, CarWale acts as a sales and marketing partner for car manufacturers (it gets paid by the manufacturer for this). A bulk of its revenue comes from brokering new car sales (bringing in a car customer to a dealer) and offering marketing services to car manufacturers.

In November 2010, the US $3.6 billion German media conglomerate, Axel Springer along with India Today Group, bought over a majority stake in CarWale. Seedfund, the company’s first investor, completely exited in this round along with other venture investors. Dubey continues to own a significant minority stake in the company. Dubey says, “With strategic investors like Axel Springer and India Today, we can certainly take CarWale to the next level. The Indian car market is slated to be the third largest by 2018. It will cater to 11 per cent of the car buyers worldwide. So, the potential for growth is tremendous.”

Today, CarWale attracts 2.6 million unique visitors every month and employs over 170 people. Dubey says the business is growing at 100 per cent every year. He also adds: “Running a business is a journey and opportunities keep coming. We are not pre-conceiving a Plan B or a Plan C. We need to be able to go through these transitions and iterations quickly in order to succeed.”


Key lesson learnt from the CarWale journey:

Running a startup is a journey, you have to be nimble, make transitions as needed and eventually you will arrive at a business model that works. Dubey started with auto classifieds and used-car price guides. He thought he could sell leads to car dealers. Eventually, he is making money by being the marketing services partner for car manufacturers. One never knows what the market has in store, but the market (the paying customer) is always right. It is not a venture investor’s opinion or an entrepreneur’s idea; it is what the market demands.

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