Online automobile segment is ripe for consolidation for quite some time and in one of the biggest deals in the segment, CarWale has merged with CarTrade as the former’s investor Axel Springer is exiting from the company. Axel Springer will sell its 91 percent holding in CarWale. Axel Springer and India Today had acquired CarWale in 2010.
Later, Axel Springer had bought India Today's share and became a sole investor in the company. CarWale confirmed to YourStory about Axel Springer’s exit from the venture. Despite the merger, both entities will continue operating independently.
In an email response, CarWale said,
We are not in a position to discuss anything related to the deal structure nor transaction amount. While Axel Springer is indeed exiting CarWale that makes it sound like an acquisition. But the reality is that both the companies are merging to become an undisputed market leader.
Importantly, this is the second M&A activity for the decade-old CarWale. Earlier, it got acquired by Axel Springer AG and India Today and has now merged with CarTrade. CarWale is a market leader in online new cars market (though it also operates in used car segment) while CarTrade leads the used cars segment.
Founded in 2009, CarTrade had raised $30 million from Warburg Pincus, Tiger Global, and Canaan Partners in 2014. In February this year, the company claimed to have listings of more than 100,000 used cars in India and traffic of more than four million unique visitors every month. It also secured an undisclosed amount from Chip Perry, Former CEO of US-based automobile classifieds major Auto Trader.
CarWale's response added,
It's an exciting opportunity for everyone at both the companies to take it from here and make it huge. The consolidation will help us deliver cutting-edge products and monetize them much better.
Experts opine that the online automobile sector is going through its second wind and had amassed over $120 million in the last 18 months. Along with online travel, the used car classifieds segment was touted as highly promising a few years ago but experienced a lull in investor appetite till recently.
CarTrade rival CarDekho joined hands with Ratan Tata and raised $50 million led by Chinese funds Hillhouse Capital and Tybourne Capital with post-money valuation of about $300 million in January this year. Led by serial entrepreneur Sandeep Agarwal, Droom secured $16 million (INR 100 crore) funding in Series A led by Lightbox.
As we said, online automobile market is ripe for consolidation. Acquisition of ZigWheels by CarDekho and CarWale by CarTrade are testimony to it. According to consultancy and market research firm Frost & Sullivan, last year close to 2.5 million new cars were sold in India while used cars amassed three million sales during the same period.
The acquisition makes a lot of sense to CarTrade which will help it ramp up stake significantly in new (not used) car segment. With CarWale in the kitty, CarTrade seems to be well equipped to tackle competition in both used and new car verticals.
CarTrade competes with CarDekho, Droom, and horizontal classifieds major Quikr and OLX. To tap used car segment, Quikr had launched Quikr Cars in August this year.
In the near future, we may see more M&A activities in automobile and overall classifieds space. Horizontal biggies (OLX and Quikr) are expected to consolidate across three verticals -- real-estate, and automobile. Stay tuned for more update from the overall classifieds sector.