Here’s how this Mumbai-based startup is changing the way India finances two-wheelers

Launched in 2018, OTO Capital offers alternate finance options for two-wheelers priced under Rs 2 lakh.
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Hailing from Udaipur, Rajasthan, Sumit Chazzed, an IIT-Bombay graduate, has started an alternative mode of financing vehicle ownership in India. The Mumbai-based startup OTO Capital claims to offer a 30 percent lower rate than current motorcycle loans available in the market.



Origins of OTO Capital

The seeds for OTO Capital were planted quite early. A serial entrepreneur, Sumit’s first venture was in the education technology space which got acquired by a Silicon Valley company in 2013. Post that, after going through a bad experience while trying to buy a second-hand bike, Sumit started CredR along with his partners. Between 2014 and 2017, CredR registered over 75,000 transactions, and today, the startup is one of the most trusted second-hand two-wheeler sellers in India. While working in CredR, Sumit got insights into the market.

The Indian two-wheeler market has matured, which is reflected in consumer perception. Today, consumers like to change vehicles fast. From an average changing period of six to seven years, people have started changing their vehicles every three to four years. Frequent safety and emission regulation changes have also changed the way people look towards personal mobility solutions.

Speaking to AutoStory, Sumit said, “More and more consumers are now opting for finance as an option. It is no more a taboo. In fact, in the automotive market, more than 75 to 80 percent of consumers are availing the benefits offered by vehicle financing options rather than putting their cash by themselves. They don't want to take the hassle and commitment of factors like insurance and maintenance fees. This is where OTO Capital comes in.”

Consumers are now focussing more on NBFCs (non-banking financial companies) than taking loans from banks. Currently, when consumers walk into a showroom and get an option to own a vehicle of their choice, they can do it with minimum paperwork. Further, OTO Capital offers complete paperless transactions.

The Mumbai-based startup takes care of all other hassles like insurance, maintenance, as well as resale. OTO Capital is aiming to be an affordable and flexible way of financing a two-wheeler. And while several studies suggest that Indians are still afraid of taking a loan, that’s not the case with the automotive market. A majority of the sales taking place from brick and mortar dealerships has also kept the scope of an online-based financing nascent, as dealerships have often been found to prefer banks over such models.

Speaking to AutoStory on the condition of anonymity, a leading two-wheeler dealership manager in the Delhi-NCR region said, “Customers tend to trust banks more than these new-age financing models. Hence, having a bank representative at the dealership has been more beneficial for us. Things though are changing, and more customers today are enquiring if we have alternate finance models that do not require unnecessary paperwork and can be completed online.”

OTO Capital, though, presents a win-win situation for customers, as well as dealerships. While customers get easy and fast access to credit for purchasing a two-wheeler, dealerships benefit from the former by quickly confirming a purchase right on their first visit.

How does it work?

At present, OTO Capital is working by tying up with dealerships. All consumers have to do when they walk into a dealership, is show some basic documentation like their aadhaar card or PAN card and six months bank statements. OTO’s representative completes the customer’s KYC and checks their eligibility. This completely frictionless and hassle-free process allows instant approval, and customers can walk out of dealerships with a booked product after paying a token amount of Rs 5,000. This entire process takes just 15 minutes to complete.

OTO Capital allows customers to either return the two-wheeler at the end of the tenure or purchase it if they want. After the end of the tenure, customers can either pay the rest of the two-wheeler’s cost to fully buy the product or return it and get back the security deposit. The two-wheeler is registered in the name of the customer, and if they decide to return it, the startup will help them complete the process of transferring the vehicle’s paperwork.

Sumit adds, “Whereas a bank has a customer paying back the entire value of a two-wheeler, what we are saying is, that even after three years, the product has a certain value. On day one, we are ready to commit that. Say you ride the two-wheeler for a certain number of kilometres and return it to me. We are ready to commit up to 50 percent of its value. If you want to extend the tenure, one can do that and pay the remaining amount. This also allows us to effectively reduce the monthly EMI, as the loan is only on the pre-decided amount, which is usually half of the ex-showroom cost of the two-wheeler.”

The freedom to pre-close the loan after 12 months also adds to the ease of owning a vehicle via the startup.

Availability of services

At present, OTO Capital is operational in Bengaluru and Pune. Both these cities have immense potential, as a large number of people come to these cities from other cities and do not wish to stay long. The business model is easily scalable. While the company has its equity, it has partnered with several banks that invest in the startup.

“We are planning to expand into 10 cities in the coming years. Delhi and Hyderabad will be the focus cities. We would also like to expand to neighbouring areas around these cites as well as existing regions. Following a regional approach, we will be in the top five cities and then expand in around a 200 km radius around these cities. This validates the model deeply and allows maximum utilisation of resources. We want to build up our market share in regions we known and understand very well, and then expand to new cities.”

The startup is also getting interests from several manufacturers. While they haven’t tied up with any OEMs at the moment, it is in conversation with several players.

With the Indian automotive market going through its worst-ever slump, Sumit believes that the ongoing slowdown has helped them a lot.

He added, “Consumers have their concerns. They want to own their vehicles, but with the media talking about changing regulations, they are wary of buying a new product. But with OTO Capital’s option of owning a vehicle for a certain amount of time, the consumers can just give it back if they don’t like it. That has given us a boost to offer them a better proposition.”

(Edited by Suman Singh)


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