Cars24 lays off 600 employees, latest in a string of Indian startups to do so

Photo: Reuters

SoftBank– and Alpha Wave Global-backed used car marketplace Cars24 has laid off nearly 600 employees, joining a host of growth- and late-stage startups that have recently let go of employees to conserve cash as fundings slow down amid volatile global markets.

“This is business as usual—performance-linked exits that happen every year,” a Cars24 spokesperson said in an email, adding that the layoffs, which affect around 6% of employees, are not in a specific department.

In December last year, CARS24 had closed a $400-million round of funding, including a $300-million Series G equity round alongside $100-million debt from diversified financial institutions. The funding valued the company at over $3 billion, about double the valuation during its previous round in September 2021.

Currently, CARS24 is clocking an annual revenue run rate (ARR) of $1 billion; it plans to double its ARR by December 2022.

Asked why the company is not profitable despite a rise in demand for used cars, a Cars24 spokesperson told DealStreetAsia, “CARS24 is profitable at unit economics level. We continue to invest in product, technology and setting up cutting-edge infrastructure to ensure the quality of cars. We are expanding in all four countries where we operate.”

Besides India, CARS24 operates in the UAE, Thailand, and Australia.

According to Praxis Global Alliance, the Indian used-car volume was estimated at 3.9 million units ($17.9 billion in value) in FY21, down from 4.1 million in FY20 due to the pandemic. The market is expected to reach 7.7 million by 2026 and is estimated to be valued at $44.7 billion then.

Due to adverse economic conditions and longer waiting periods for new cars due to a shortage of chips, there has been a surge in demand for second-hand cars. This, however, has not translated into profitability for Cars24 or its competitors like Spinny and CarDekho.

Media reports suggest that investors are advising startups to cut costs and increase the runway by as much as three years, with plenty of funding rounds being renegotiated, stalled, or canned. To contain costs, at least seven Indian startups have laid off employees in May alone, with three of them being edtech companies.

Expand Table

Layoffs in May 2022

CompanyNumber of employees laid offIndustry
Unacademy Group1000Edtech
Vedantu624Edtech
Cars24600Cars marketplace
Trell300Social commerce
Lido200Edtech
Furlenco180Furniture rental
OkCredit35Fintech
Source: Company announcements, media reports

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