Can Hiroshi Nishijima’s Strategy Bring An End To Zoomcar’s Financial Woes?

Grappling with operational uncertainties and mounting debt, Nasdaq-listed rental car marketplace Zoomcar seems to be on track to resolve some of its troubles. In a statement on Thursday (January 9), the company claimed to have attained its “highest-ever” unaudited and unreviewed contribution profit in December 2024. 

The Bengaluru-based company claimed to have realised a contribution profit of $495K in the month, which it says was sufficient to cover its operational costs in India. The company attributed the upticks in its financials to 17% growth in bookings in December. 

It is pertinent to mention that these are Zoomcar’s estimates and are subject to revision until it reports its full financial and business results for the third quarter of the fiscal year 2024-2025 (Q3 FY25) on February 12.

Founded in 2013 by David Back and Greg Moran, Zoomcar operates a one-stop shop platform for renting self-driving cars. It connects car owners with guests, who can choose from a selection of cars for use at affordable prices. The company listed on Nasdaq in December 2023 via a SPAC deal.

In the September quarter of 2024, Zoomcar managed to cut its consolidated net loss by 72.9% to $3.35 Mn from $12.40 Mn in Q2 FY24. Meanwhile, its revenue also dipped 16.7% year-on-year (YoY) to $2.23 Mn in the quarter from $2.68 Mn in the September quarter last year.

This was the third straight quarter of decline in revenues. Besides, the company also saw significant changes in its top deck, as well as its offerings, in 2024. Things were so bad that Zoomcar said that it was unsure of its future at the end of the September quarter. 

All of these also resulted in a sharp decline in the company’s share price. On Thursday, the stock was trading at $1.78 on the Nasdaq.

So, how is the company dealing with its turmoil? In a conversation with Inc42 last month, Zoomcar’s interim CEO & COO Hiroshi Nishijima outlined a three-pronged strategy to address the challenges — improve cashflow, repay debt, and reduce expenses. 

Fixing The Financial Health

On November 14, Zoomcar informed the SEC that it has “substantial doubt” about its ability to continue as a going concern. It reasoned that it posted a loss of $5.88 Mn loss in the six months ended September 30, 2024 and had a negative working capital of $35.02 Mn. 

Further, it also pointed out its inability to pay back its financial creditors as a major concern. Nishijima, who assumed the role of CEO in June 2024, said that he has been focussing on improving the cashflow of the company by increasing the total number of transactions processed by Zoomcar. 

“I understand that we need to grow our revenues as a listed company. But from a priority point of view, the major concern is to grow the number of bookings. For this, our major strategies include slight discounts in our prices and promoting shorter duration bookings,” he said.

He added that the company’s average booking duration was about two days before June 2024, and shorter duration bookings can help make more profits.

When a car is rented for a lesser number of hours, it can cater to multiple users per day. To bring in more customers, Zoomcar has been offering different forms of discounts over the last year, including a joining discount of 10%. 

Moreover, Zoomcar has brought down the costs for short-term bookings to just INR 499 for 4 hours as opposed to an average cost of INR 3,200 for renting a car for a day. The interim CEO claimed that this helps the company build an initial connection with their customers. To build a lasting relationship, Zoomcar has introduced bigger discounts on second-time bookings. 

Meanwhile, the company has also been undertaking multiple experiments with its product stack in recent times. Last month, it forayed into ride hailing services with the pilot launch of Zoomcar Cabs in Bengaluru. In November 2024, it launched a subscription service to offer users self-drive cars for extended periods, starting with a minimum 7 days to more than 30 days.

Nishijima said that the focus on short duration bookings is only for the short term, as the company would revise the prices once it is able to cover its recurring expenses. As of December, he said that the company was making profits from every booking. 

But, he refused to give an approximate timeline by which Zoomcar can post an EBITDA positive quarter. 

Plans To Repay $35 Mn To Investors

Despite the slight uptick in its cashflow, Zoomcar’s management arrived at the conclusion in November that the company would not have sufficient funds to meet its obligations within a year if it failed to raise additional funding.

To tackle this, Zoomcar is looking to raise an external funding of $30 Mn to meet its financial obligations till November 14, 2025. Of this $30 Mn, the company raised $9.15 Mn via private placement in November 2024. 

Nishijima informed that the company was in ongoing discussions with its business partners to reschedule the debt payment in a “mutually agreeable way”. 

Zoomcar is likely to raise the remainder of the amount in tranches, the interim CEO said. The sizes of these tranches would depend on how the talks with its partners pan out. He added that the company is banking on improvement in its business for this. 

“From the business partners’ point of view, if they strongly believe that this company will turn around the situation, Zoomcar will bounce back and sustain for a long time. Given that our business has actually improved in the last six months… many of our partners, especially whose outstanding amount is big, have agreed for the discussions to reschedule payments,” he said.

Stability In The Top Deck

As its troubles rose, Zoomcar also saw a number of exits at the top level. In June 2024, its board decided to terminate the employment agreement of its cofounder and the then CEO Moran. 

“On June 20, 2024, Greg Moran, the company’s chief executive officer, was terminated from his role. Pursuant to Mr. Moran’s employment agreement, Mr. Moran is required to resign from the board of directors of the company (the “Board”) as a result of such termination,” the company said in a filing.

Following this, Moran filed a case in a US court against Zoomcar, Sternaegis Ventures and Aegis Capital Corporation, alleging that he was dismissed from his position without any specific reason. He also claimed that he did not receive the compensation due to him, which amounted to more than $238K. 

A month after Morgan’s exit, Zoomcar also bid farewell to its president Adarsh Menon. He put in his papers within six months of joining the company in July. Besides, its chief financial officer Geiv Dubash also left the company in June 2024 after a near three-year stint. 

Nishijima claimed that the two departures after Moran’s exit happened on an amicable note. Moving forward, he foresees stability in the leadership team, which would help the company improve its state of affairs. 

“Now our leadership team is shaping out to be like a long-serving, homegrown leadership team,” he said.

[Edited By Vinaykumar Rai]