Want A Cheaper Two-wheeler Loan? This Startup Can Help

OTO Capital claims to offer a 30 per cent lower EMI than current motorcycle loans available in the market

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If you look at vehicle ownership in India, it has been stuck in the previous generation mindset of owning the car or two-wheeler as a long-term asset. Compounded by rigid financing and ownership models, India has seen a significant drop in car ownership, notably among the younger generation. The upwardly mobile younger generation of Indian customers are keen to get to their dream car earlier, without being stuck with it forever. The duration of owning the same vehicle has come down significantly and customers are now seeking faster access to vehicles, low-cost EMIs, and quicker upgrades. 

OTO Capital

Every year in India, more than 3.25 million new cars and 20 million new two-wheelers are sold out of which more than 60 per cent are financed. 

One of the significant reasons for the recent slowdown of the automotive industry is believed to be caused by challenges in financing vehicle purchases. 

However, India is expected to see a similar turnaround wherein customers value access over ownership and alternative financing models become a more viable and preferred choice, especially among young buyers. 

Hailing from Udaipur, Rajasthan, Sumit Chhazed, an IIT-Bombay graduate, has started an alternative mode of financing vehicle ownership in India. The startup OTO Capital claims to offer a 30 per cent lower EMI than current motorcycle loans available in 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.

Consumers are now focussing more on non-banking financial companies (NBFCs) 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 platform has introduced the concept of two-wheeler leasing in India and claims to be India's first startup to do so. The company was launched in April 2018 and is based in Bengaluru. It is also operational in Mumbai and Pune. 

OTO Capital co-founder Chhazed told Entrepreneur India in an interview, “There are 140 million two-wheelers in India and every year another 20 million two-wheelers are sold. Over $10 billion in two-wheeler financing supports this industry yet the experience for customers is still stuck in the 1980s. It is extremely broken from finding options to test driving to financing paperwork and more. Every step is disconnected from the next step and there are unnecessary delays all over. Also, my stint at CredR gave me insight that new-age customers love to upgrade faster and want to have a minimum commitment towards ownership which is not possible with existing options. Harsh and I both belong to the tier-III city and have been owning/riding two-wheelers since an early age and can relate to this problem very well. Thus, we definitely believe the millions of two-wheeler owners deserve a better experience. With OTO we envision to re-imagine two-wheeler ownership for millions of Indians. OTO aims to present a tenfold simpler, faster, and more convenient way for Indians to buy, finance, and own their two-wheelers.”

The company has raised three rounds of funding totaling $8 million, the latest being the $6 million Series A raised this year, led by Matrix Partners along with Prime Venture Partners, 9Unicorns Fund, Better Capital, and Venture Catalysts. Some of the Angels have also participated. The market is bullish and they are already seeing a lot of incoming interest from various Growth Funds which may lead to a larger fundraise during the latter part of the year, he said.

The company acquires customers digitally as well as through two-wheeler showrooms. Post-COVID, they are seeing a surge in online inquiries where customers not only want to get the best finance options but also explore and choose their favorite two-wheeler in the comfort of their homes.

According to Chhazed, the current scenario is very exciting for both the automotive and fintech industries. With a strong government push on EVs and COVID bringing change in the way consumers perceive mobility options, this has opened new opportunities. Also, RBI has been very progressive in digitizing the lending industry which again gives a chance for innovation. There are different startups that have been trying to solve different problems in the auto space and there has always been overlapping in certain offerings but for now, the company does not have any direct competition.  

“We aim to expand to 15 cities by next year, evolve our commerce cum finance platform and enable 100,000 Indians to buy and finance their dream bike with OTO,” he mentioned.