3 reasons why investors are turning towards auto service startups

The year 2021 alone proved to be an excellent time for the used car market to grow and expand its niche in the auto service market. These companies used increasing digitisation to their benefit and sold more pre-owned vehicles in India than ever before.

Auto service is a growing industry. Since the onset of the COVID-19 pandemic, there has been a trend of people preferring private vehicles over public transportation, which directly increases the demand for automobile services. This shift spotlighted the once unacknowledged field of automotive service startups.

At the same time, more companies began indulging in this field by manufacturing car service models and related services. Today, there is an abundance of car services in India that offer affordable prices, and many more are coming up still. At this rate, this estimation of the car service and repair market can reach $25 billion over the next ten years, at a CAGR of 12 percent.

These statistics present an opportunity for investors to utilise their funds in an industry with a bright future. Here are those three main reasons that invoke investors' faith in the auto service start-up industry :

Booming sales of second-hand cars

India has the fifth-largest used car market in the world after China, the US, Japan, and Germany. On average, over five million used cars are sold annually in India. The demand for personal mobility is even more accelerated due to restrictions implemented during the lockdown when many individuals became unable to gain access to public transport. As compared to pre-COVID-19 time, the demand for second-hand cars was increased to 20-30 percent after the lockdown.

The year 2021 alone proved to be an excellent time for the used car market to grow and expand its niche in the auto service market. These companies used increasing digitisation to their benefit and sold more pre-owned vehicles in India than ever before.

Collectively, becoming a multi-billion dollars worth franchise. From last years' estimation, India's used car service industry can grow 12-14 percent in the next few years. Furthermore, many first-time car buyers opt for owning second-hand cars over new models, mainly due to their affordable price, low service, and maintenance fees.

At the same time, many millennials want a reduced car ownership period, which makes used cars more suitable. With more people opting for second-hand cars, the touch sales will grow to over 70 lakh vehicles by 2025, and with that, funding will increase simultaneously.

Ride-sharing startups are extremely popular

In recent years, auto services startups that offer ride-sharing services are becoming hugely successful in India. The primary motive behind this idea was to provide on-demand vehicular services to an average citizen. This will reduce the need for a person to own a separate two or four-wheeler, and they can easily rely on attaining transportation through just a few clicks on their phones.

With easy accessibility, the demand rapidly grows, which gets investors to take notice. Their high success rate leads funders to take serious consideration about ride-sharing businesses and their upcoming impact on the market in the next few decades. Even during the pandemic, with proper SOP guidelines, many ride-sharing startup chains continue to do incredibly well.

These turns of events speak of how well investments can pay off in an auto service startup market.

The onset of EVs in India

As India moves towards a sustainable future, electric vehicles have become a topic of discussion for their independence from fossil fuels that cause pollution.

For several such reasons, electric vehicles (EVs) are getting attention from consumers and, apart from being highly anticipated. With many investors taking notes from the success of the EVs market in other countries, sparing funds for a promising electric vehicle startup in India will become their top priority.

In response to this new auto service, startups are showing interest in the electric vehicles niche. With these statistics, reports have estimated the Indian EV market to grow at a CAGR of 36 percent till 2026, and by 2030 the market can be worth over $206 billion. This could require a massive investment collectively of over $180 billion for manufacturing and charging ports development, and investors are up for it.

Auto service companies are leading towards better transformation. With big companies aspiring to build game-changing products and services, it's not surprising that high-end investors want to incorporate the auto service industry.

The auto service startups are mainly developed around innovation and provide new cutting-edge technology to regular consumers. Suppose they are successful in implementing the tech goals as well as securing the trust of the market, in the coming years, investors from all across the world will want to partake in the Indian auto service industry.

Edited by Kanishk Singh

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)


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