The SoftBank and Alpha Wave Global-backed company is looking to cut its burn rate by about 50% to expand its track and readjust to a relatively slower rate of growth, starting by halting its aggressive expansion plans in the future. overseas in places like the United Arab Emirates, the Middle East, Thailand and Australia.
The Gurgaon-based company’s consumption, or cash spend rate, was around $20 million per month and it is now looking to bring it down to around $10 million, one of the people briefed on said. the case.
It has closed most of its offline centers across the country, except in the National Capital Region (NCR). While the decision to close offline centers was made last year, it has been executed throughout this year.
Cars24’s recent layoff exercise would have cut at least 700 jobs, the people quoted above said. This is more than the previously announced number of 600. It also halted the replacement of existing vacancies in the company, they added.
A Cars24 spokesperson declined to comment.
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The firm’s spending crunch across all functions points to broader tension in the used-car sector in India as well as globally, where shares of US-based Caravana recently fell around 90%.
“Yes, they (Cars24) are cutting costs to adapt to the new reality and have a longer track,” said a person familiar with the company’s thinking. “He still has over $500 million in the bank, but these steps are being taken with an eye on whether the ‘funding winter’ lasts longer than expected.”
Another person with knowledge of recent events said that while the company was not looking to exit any of its overseas markets, it would pause aggressive marketing and expansion plans. “Cars24 was looking at the overseas market extensively, but that perspective has changed,” the person said. “Even in India, the company has significantly reduced marketing spend and the change in strategy has been communicated to internal teams.”
Among other changes, the company is passing on payment gateway fees to consumers for large car purchases.
These moves at Cars24, which has risen to prominence as one of the top startups over the past two years, underscore the current sentiment among startup founders and investors that the funding slowdown could worsen in the future. second half before the start of a recovery.
In May, ET reported that Meesho was one of the best-funded startups looking to cut costs amid a “funding winter.”
ET reported on May 30 that major venture capital (VC) funds are expected to slow down large deals and issued memos to portfolio companies on saving money as a priority. According to data from Venture Intelligence, venture capital funding for Indian startups fell 37% year-on-year in the second quarter of this year to $6.9 billion.
Cars24 had closed a $400 million financing including debt in December last year, after which it was valued at $3.3 billion.
“You have to adapt to the reality of the market. Compared to earlier aspirations of, say, doubling growth, now that they (Cars24) are looking to reduce consumption, expectations for growth are subdued,” said one of the people quoted above.
Several industry sources said growth was slowing in the used car business across all platforms, but sources familiar with Cars24’s thinking said it continued to grow on a monthly basis. At the time of the funding announcement last year, Cars24 was selling around 20,000 cars a month, ET reported.
Spinny and CarDekho, backed by Tiger Global, are among other big players in the space.
“As is evident, things will get tougher in the second half before any chance of a recovery. While consumption across all sectors is muted, used car sales are sure to slow,” a person at the file current.