Spinny, the five-year old Gurgaon-based start-up in the used car space with investment by Nandan Nilekani, is expecting growth in the short-term as per a recent study on the segment's prospects. It has however deferred its expansion plans due to the impact of the Covid-19 on the buyer sentiment.The used car market is one the most lucrative business areas within the automotive retail segment owing to its promising returns on low capital investments. However, in India, where the potential is immense with a market size of over 4.2 million units, which was nearly 1.2 times that of new cars sold in FY2019 at 3,377,436 units, there is a major deterrent in the form of the unorganised nature of the market operations.According to a Mahindra First Choice Wheels (MFCW) study, the used-car space in India is primarily in the clutches of unorganised players, who hold nearly 40 percent of the total volumes, while only 30 percent is left with organised players such as MFCW, and remaining 30 percent sales still coming from direct person-to-person transactions. While according to the study, the market is set to grow to up to 7.2 million units by 2022, there is a major challenge that needs to be addressed - maintaining trust and transparency with customers. Most of these unorganised 'stockists' operate on a park-and-sell model, with the sole aim of maximising unit profit at the behest of customer's trust and vehicle safety. The cars don't come with any certification of being non-accidental and often see buyers losing their money and peace of mind after the purchase.First-time car buyers or those who are on a budget, who form nearly 70 percent of the potential used car customers are the ones who get usually trapped and cheated with a defective, non-roadworthy and unsafe car. As a result, the organised spectrum of the segment which includes carmakers' own channels such as Maruti True Value and Honda Auto Terrace, and more recently has seen the advent of start-ups such as Cars 24 and Spinny are trying to change the status quo.The business model here revolves around fetching a slightly higher premium for a product that comes with the assurance of having a clean paperwork, roadworthiness, and being maintained regularly for its time with the previous owner. According to Niraj Singh, co-founder and CEO of Gurgaon-based Spinny, "The used-car space was a completely broken category and we understood that there needs to be vertical integration to solve the problem of quality, trust and transparency for the new-age Indian."The company which started out in 2015 as a C2C-managed marketplace model pivoted one-and-a-half years down the line to adopt a full-stack used-car retail approach."We were able to gain a lot of insight in the initial operations and realised that the root cause of mistrust has been information asymmetry. We could have only solved this problem from a buyer's perspective by having full control over the entire value chain in an end-to-end fashion," tells Singh who is a 2007-batch IIT Delhi alumnus from the electrical engineering branch.Having a presence in four cities at the moment, including Delhi-NCR, Bangalore, Hyderabad and Pune, Spinny which has raised fresh capital of Rs 315 crore from Nandan Nilekani's Fundamentum Partnership in March 2020, had started-off with initial funding from Blume Ventures, Smile Ventures, Accel, SAIF Partners and Alteria Capital totalling close to Rs 103 crore.The start-up which has sold close to 10,000 pre-owned cars so far wants to establish its brand and sees the Covid-19 crisis putting out a huge opportunity."We are excited about the future because Covid can result in very strong demand for our category, and people can relate and trust our model. Our main motive is that the buyer should be able to purchase the car with the same confidence, like if he or she does in the case of a new car," Singh adds.While it is already seeing demand bounce back in the market and beating its own estimates of an anticipated recovery by August-September 2020 timing, the response at its Banglore, Gurgaon and Delhi outlets has been "encouraging" in the least. "We are not advising people to visit our car hubs and are recommending home test drives. In spite of that, within just two weeks of resuming operations last month, Bangalore is already at 70-80 percent of pre-Covid volumes while Delhi and Gurgaon are at 50 percent," he updates. The company managed to sell 300 cars during the month of May when partial relaxations on the nation-wide lock-down were lifted."Surprisingly, the demand is more or less similar to the pre-Covid days with maximum consumer interest coming in for the Rs 300,000-400,000 and Rs 400,000-600,000 price bracket. While our core focus is on the mass-market cars, however, beyond Rs 800,000 the demand has completely vanished," Singh remarks.Full-stack digital retail modelSpinny, which usually holds approximately 1,000-1,200 cars in its inventory at any given moment, benefits from a tech-enabled platform, which integrates technology right from vehicle assessment through to listing of the cars online as well as to managing bookings, test drives and payments - for which it has recently switched over to a fixed-price model."When we went live in Hyderabad in November 2019, we decided to start off with a fixed-price strategy even at the cost of marginal business for a few months. However, we didn't sense any real push back from the market. In fact, people were very happy that the overall process was smooth and there was no mark-up in the initial quoted price just for the sake of negotiation," Singh explains. It operates at a unit margin of seven - eight percent after adjusting the refurbishing cost on a used car.After viewing a car listed on its website and studying its assessment report, a prospective customer can schedule a visit to its 'car hub' - usually a parking in a shopping mall or a hotel complex - where the cars are parked or put a request for a doorstep test drive when the company sales executive will show up with the selected car in question.Buyers can also avail finance facility online and schedule a timing to take the vehicle's delivery or get it delivered at their doorstep. The company has also been able to keep a strict control on quality of incoming cars in its inventory by a thorough 200-point inspection process manned by skilled 'inspectors' who are trained on a regular basis by the training and quality control team. Spinny claims that even if a car comes into its system with a defect which couldn't be traced at the first inspection, its in-house workshop rejects the car on second evaluation and it is then immediately discarded at a loss or equivalent cost."In this category, neither input nor output is standard. Our sourcing is in the local market only and we have certain quality requirements in terms of documentation, mechanical condition as well as the safety aspects of a vehicle," Singh says.While it sources its cars from auction platforms, new car dealers who get old cars in exchange as well as car leasing companies, its top-priority remains to buy cars from individual sellers who form around 65-70 percent of its fleet size and this number is slated to go to 100 percent over the next one-and-a-half years' time, as that is where the company finds creation of demand for new cars, as well as benefits of a price advantage for itself.Covid defers business expansion Now, like most businesses as it faces choppy waters due to the Covid-19 pandemic killing buyer sentiment, Spinny has put on hold its expansion plans to Mumbai and Ahmedabad, where it was supposed to launch in April this year."For some time, we will not enter any new city and will only keep going deeper in our existing markets. We now see a possibility of expansion only in the second quarter of next year when we might look at going multi-city at one go in a non-franchise model," Singh tells.While it is difficult for it to project growth numbers in a post-Covid scenario, the company estimates that the used-car category is relatively immune and wouldn't see much damage from the crisis. It is currently experiencing a 40 percent conversion rate from its home test-drive facility."Car is not just a dream or an excitement anymore, people have got a lifelong lesson that they must have a personal source of mobility to attend any on-demand need," Singh concludes.Spinny, which employs 500 people including 50 in the product and engineering teams, has already accomplished unit-level break even for most of its car hubs spread in these four cities, and targets corporate-level profitability by the end of next year. It will, however, continue to raise more funds to diversify into 'new segments' related to solving customer problems, which is why the brand has nowhere the word 'car' mentioned in it.