Emerging Asia’s springboard for mobility: CarDekho
Mobility plays a critical role in unlocking opportunity for emerging consumers, enhancing access to healthcare, education, and employment. However, for low-income earners finance is often hard to obtain, insurance costly, vehicles are of low quality, and pricing is opaque. CarDekho, a leading auto-tech platform in India, solves this problem by providing a transparent marketplace for quality vehicles, loans, and insurance. It serves 3.6 million emerging consumers, with 75% of its used vehicles purchased by customers earning less than US$10000 per year. LeapFrog is supporting expanded reach for CarDekho’s platform in India and new Southeast Asian markets, and accelerating its efforts to improve women’s access to mobility and promote affordable electric vehicles (EVs).
For many millions of emerging consumers, mobility is the key that unlocks opportunity.
Mobility dramatically increases school enrolments, improves access to healthcare, broadens employment opportunities, and is a major source of direct employment for many emerging consumers.1
This is true across emerging markets: one in six women around the world do not look for work for fear of being harassed in transit.2 Around 50% of Sudanese parents do not take their children to hospital because of high transport costs. In Pakistan, women who have access to quality roads are more than twice as likely to attend pre- natal consultations. Primary school enrolment for girls increased from 17% to 54% for families in Morocco with access to roads.3
In a recent study, 50% of women in Chennai, India reported being sexually harassed whilst travelling on public transport.4 In Bangladesh the number is as high as 84%.5 A poll conducted by Thomson Reuters Foundation has ranked India as the fourth most unsafe country for women to use public transport.6
Mobility is deeply linked to poverty, and emerging consumers are quick to improve their personal mobility once they can afford it.7 Increasingly, as economies move online, transporting goods and people, and delivering urban services like food, is also a major source of direct employment for emerging consumers.8
Traditionally, however, access to mobility for emerging consumers has been a difficult and fraught experience.
Personal finance is hard to obtain, insurance can be costly, vehicles fail to meet safety and emissions standards, and market pricing is opaque.
In India, for instance, 80% of all car sales happen outside of the showroom, through private sales or informal dealers selling out of garages and online. There are estimated to be ~30,000 vehicle dealers, and these dealers frequently tamper with odometers or perform rudimentary repairs, fail to facilitate clean title transfers, carry small inventories that offer less choice, and require high margins on vendor- organised finance to compensate for lack of scale and volume. Overall, this leads to low consumer trust.9
In this context, supporting increased access to mobility encompasses both delivering financial inclusion through vehicle finance and insurance options, and also delivering quality and consistency to lower-income consumers via more transparent vehicle marketplaces.
CarDekho is a leading auto-tech and mobility financing company in India, operating auto sales, classifieds, finance, and insurance businesses. It serves 3.6 million emerging consumers, and a staggering 86% of Indian purchasers will visit the platform before buying a vehicle.
CarDekho’s market position gives it enormous power over the story of mobility in India, and in other emerging economies across Southeast Asia like Indonesia, Philippines, and Malaysia where it is expanding its presence. CarDekho’s insurance subsidiary, InsuranceDekho, is one of the largest digital insurance brokers in India. It enables millions of emerging customers to access insurance products and at the same time provides employment to over 10,000 active sales agents from Tier II and Tier III cities in India.
Overall, CarDekho’s products and services reach 3.6 million emerging consumers (defined in India as those with monthly household income less than US$600). Of these, the majority purchase vehicle insurance (3.3 million), but there is an increasing segment seeking used vehicles (300,000) and used vehicle finance (100,000).
The average used car buyer on CarDekho earns a relatively small salary or runs a small business and may not have a fully documented recurring source of income. Three quarters of those who accessed used car finance through CarDekho earn less than US$10,000 per year.
These low-income consumers are dramatically under-served. For instance, used car loan penetration is ~17% in India, compared to developed markets where penetration is ~75%.
CarDekho not only improves access to vehicle insurance and finance but has made a concerted effort to improve the quality of vehicles sold on its platform. It provides documentation on each vehicle that validates ownership and accident history, as well as promotes new and affordable EVs like those produced by Mumbai-based startup Strom Motors and existing manufacturers like Tata, some of which retail for as little as US$6,000.
CarDekho will be an important platform in enabling India’s transition to EVs. Tax incentives and subsidies across Indian states now mean it is realistic that low-income consumers can upgrade traditional petrol and diesel vehicles for EVs. In Q1 FY22, there were 3.3m searches for EVs on CarDekho’s sites.
LeapFrog believes that balancing access to mobility with improvements in transport safety and environmental impact is key to delivering an overall improved quality of life to emerging consumers.
LeapFrog will leverage its long history and expertise in growing Indian insurance leaders, with prior investments in Mahindra Insurance Brokers and Shriram Group, to enhance the reach of CarDekho’s vehicle insurance products, expand its agency network, and explore opportunities to expand into health and life insurance.
A key part of the mobility story also involves enhancing the access of women and girls to both vehicle loans and purchases. This starts at the top in a traditionally male- dominated sector, and so LeapFrog will support efforts by CarDekho to improve women’s representation on the board of directors and will work with the company to improve diversity across its leadership team.
LeapFrog’s customer experience (CX) experts plan to support CarDekho to grow across low-income consumers seeking access to their first vehicle or to upgrade their existing vehicle. For instance, CarDekho has the opportunity to expand used vehicle finance products, which offer low- income consumers access to more affordable vehicles, but which banks typically eschew.
India is on the cusp of making EVs truly affordable, with a range of domestic manufacturers launching affordable EVs in a revolution similar to the proliferation of cheap petrol cars a decade ago. We believe it is important to help CarDekho both grow its reach into the emerging consumer segment, through improved delivery of its finance and insurance products, while also supporting the company to aggressively expand low emission vehicle sales across emerging Asia. LeapFrog’s capital will accelerate the portals growth into new emerging consumer markets and ensure affordable finance and insurance products can help catalyse an upgrade of existing vehicle fleets to EVs.
LeapFrog will work with CarDekho on environmental programs across its platform, and to track and target key impact data including average selling prices, vehicle types, % first time buyer, EMI/income ratios and other factors that indicate CarDekho’s products are ever more accessible and affordable to emerging consumers.
Delivering and scaling a trustworthy vehicle marketplace, finance, and insurance experience for Asia’s emerging consumers will tackle many of the mobility access issues faced across the region, empowering people to escape poverty traps and to access new opportunities in employment, education, healthcare, and other essential services.
5.A Study of Women Harassment in public transports in Bangladesh, IJSB (2019) 6.YouGov, Thomson Reuters Foundation (2014) 7. Pramit Bhattacharya, “How much the richest 1% earn and spend,” Mint, December 2, 2016, https://www.livemint.com/Home-Page/QxSmwS3bn5alaoRMKexoKJ/How-much-the-richest-1-earn-and-spend.html. 8.Understanding Transportation in Emerging Economies, CSIS (2019) 9.Indian Blue Book Pre-Owned Car Market Report (2021) Disclaimer: This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase, interests in any fund, portfolio company of any fund or other product sponsored or managed by LeapFrog Investments or any of its affiliates. This material and/or its contents are current at the time of writing (or such other dates as may be indicated herein). Any view expressed herein is based on the view of the author(s) and available information, and is subject to change without notice. Past performance is no guarantee of future results.
This case study was first published on October 14th, 2021