When founders of car aggregator Justride found themselves running short of resources for stocking enough vehicles to meet the rising demand, they thought of opening a supply chain to car owners who weren’t using their cars all the time. The micro-lease model soon added bikes to its portfolio and Justride rebranded itself as Drivezy. Drivezy also helps prospective car buyers access discounts through tie-ups with dealerships and car-finance firms. Although there is no lock-in period for cars bought through Drivezy, owners prefer to list them for rentals, as the income helps out with the EMI.
Drivezy raised $10 million last week, $5 million of which was in equity from international investors such as Das Capital, Axan Ventures and IT-Farm. Another $5 million came from Mahindra Finance, Cholamandalam Finance and Shriram Finance, among others.
“Axan invests in brilliant minds who push it to the limit — individuals who are in a position to dominate multi-billion markets of tomorrow through innovative business models — and Drivezy ticks all these boxes. With rapid and dramatic changes in the automotive industry, Drivezy is perfectly positioned to lead the democratisation of car access and ownership in India, where only 7 per cent of the 1.3-billion population own cars. Ashwarya and the Drivezy team have all the right capabilities in place and they continue to impress us as they scale their business,” said Anders Svamo Jørgensen, founding partner, Axan Ventures.
“Even after spending so much on their cars these buyers were not using them beyond 10-12 per cent of their lifespan. Wouldn’t it be more economical if they could lease out a car as and when required for use. In turn, car owners could actually earn by leasing their cars when not in use,” said Ashwarya Pratap Singh, co-founder of Drivezy. The model emerged partly from their own constraints of buying enough cars to meet the demand. Drivezy earns 25 per cent of the payments as commission. Their target consumer is the aspiring, urban 18- to 35-year-old who wants to travel but does not want to burden himself with heavy EMIs, said Singh.
Ashwarya calls their funding process a “fairy tale”. For a bunch of first-time entrepreneurs in a capex-heavy business model, the team had a hard time convincing investors. Finally Delhi-based Niraj Singh and Nikunj Jain helped them with an investment of Rs 35 lakh back in 2015. This helped bring eight cars, including three BMWs, to start the first leg of their services in Mumbai. Soon a couple of successful mentorship stints with Google and Y-Combinator helped them sharpen the business model further and access global investors.
Challenges and milestones
The biggest challenge in the initial stages was convincing vehicle owners to let strangers use their vehicles. Currently, over 1,000 cars are on the road with a little over 10 per cent of them owned by Drivezy. The company claims that owners can earn up to Rs 30,000 per month by leasing out their vehicles.
They further increased security by fitting the vehicles with IoT trackers and having a robust feedback mechanism in place for rating cars, users and solving grievances. While pricing is decided by an algorithm taking into account vehicle model and duration of use, it is flexible depending on the market. In Goa, for example, vehicle owners have complete autonomy on the pricing.
With each car taking around two months to mature into the system, the organisation lets owners and users alike settle into the system for comfort. While around 5,000 cars will put them on the profitability chart, Ashwarya hopes to put at least 25,000 cars on the road by July next year. Part of the current debt fund is going towards mobilising a new fleet in the coming months.
The next major step for Drivezy is their unique proposition for Initial Coin Offering (ICO), wherein investors can invest through cryptocurrencies. The ICO will progress in three phases. The first private offering worth $5 million, which starts in November, will fund over 1,300 vehicles across the country. In January, a second round of ICO worth $15 million will fund more vehicles and finally the ICO will go public in April with a $100 million offering and will be used to develop the sharing economy.
Why cryptocurrency? “The entire mobility sector has been under the cloud lately. So, we need to have an alternative source of investment in place, independent of the banking system. We wanted to open it to the global market,” said Singh. They see it as an opportunity for people from across the world investing in Indian assets. Drivezy aims to have two million cars in the next six years and generate up to one million jobs from them.
Expert Take: Sunjay Kapur, CEO, Sona Group
The new economy is based on maximizing capacity utilization, sharing and trust. The business model of Drivezy is similar to Buzzcar and has proven successful in the US. As we move toward a model where people are willing to share and therefore maximize the use of an asset that they have already paid for, we will see more companies
adopt this model. In addition to this people like to control their own own inventory and therefore want to make their own bookings and view accessibility themselves. Scalability is easy and depends hugely on trust. As long as the company is able to verify the user and tie in insurance in case of damage, the initial hurdle will be crossed. As people begin to trust each other business models like this will scale up very quickly. Overall this is the way of the future. Fewer people are attached to a depreciating asset and would like to monetise their investment.
Sunjay Kapur, CEO, Sona Group
What the company must look out for is regulations when it comes to car rentals. Currently the regulations for self-drive (assuming the revenue earned is a rental income) require rental vehicles to have a certain type of license plate. In addition to this valid driver license for the purpose of insurance and other controls is key. While this is a hygiene factor in most countries, we have several drivers in India without valid licenses.
Overall, this is a successful business model and can be scaled up successfully. Quality of the service and access of vehicles will be the driver for scalability.