Four Car Enthusiasts Turned Their Passion Into An IoT Startup: Carnot To Disrupt $30.21 Bn Vehicle Diagnostics Market

Rohan Vadgaonkar, Pushkar Limaye, Urmil Shah and Prathamesh Joshi have several things in common. Apart from sharing the IIT tag, they all are hardcore car enthusiasts which led them to create a vision built out of all these passions and commonalities – Carnot, an IoT startup, offering a car diagnostics solution.

The increasing demand for luxury passenger cars, growing need for emergency support, and increasing premium vehicle sales are key drivers of the vehicle diagnostics market, per se a recent report by Markets and Markets. So far, a lot has been done to make the cars smart and automatic and even driverless. However, there are only a few companies such as Automatic, MOJIO, Autobot which provide tracking solutions and wireless security for the cars. But still, for managing the car, a majority population has been dependent on service centres only.

As Urmil says, “Cars have evolved a lot over the last decade, but very little has changed in the way they integrate with the rest of our digital world. Our vision then is to connect all cars to the internet to help car owners seamlessly manage all aspects of their cars with just a tap on their phone.” With their car diagnostic solution, the founders are thus trying to disrupt $30.21 Bn global vehicle diagnostics market. At the same time, the founders are also positioning themselves in the space of car security, ready to battle with the legends using technology such as GPS, accelerometer, gyroscope and Bluetooth.

Based in Mumbai, the IoT startup currently provides a hardware component and an easy-to-use software app for ensuring whether the electronic systems inside a user’s car (in modern cars, everything comes under electronic systems) is in working order. Once integrated into the system, it can be used to monitor the car to ensure its safety, send alert signals in case repairs are required, give insights on the car’s fuel economy and more.

The product was launched officially on Amazon in January 2017. Backed by FreeCharge founders, Sandeep Tandon and Kunal Shah, to the tune of $500K, the company claim to have 4,000 MAUs (monthly active users) within a year. And has an ambitious plan to convert that number to 10,000 paying customers by the end of this quarter.

How The Journey Of IoT Startup Carnot Began?

Well, The Red ‘Check Engine’ Light Was A Trigger!

During their years in IIT, the club of four got their first platform in an inter-college competition BAJA, to showcase their passion towards cars. Here, each year, teams of engineering students from different colleges across India are invited to build race ATV’s (All Terrain Vehicle). For the neophytes in car racing, an ATV is a small open motor vehicle with one seat and three or more wheels fitted with large tyres, designed for use on rough ground.

While building these racing prototypes, one of the first things they learned was to monitor electronic systems for the vehicles remotely. They also studied existing car models extensively. And that was when they discovered the red ‘check engine’ light problem.

As Urmil explained, “The average car owner buys a brand-new car and leaves the maintenance of the car to the experts, the garage mechanics or service centres who charge for their services. Sometimes steeply. While the expense is not an issue, it is the basic knowledge gap that is a potential pain point for car owners.”

Usually, most car owners don’t even think of checking their cars regularly to find out if everything is working internally as it should. In the modern versions of many cars, one may find an option on the car dashboard saying, ‘Check Engine’. When something is interrupting the functionality of the engine, it starts blinking or flashes a red light instead of a yellow/orange light indicating there is some problem that needs immediate attention.

“In such a case, the car owner ends up taking the car to the garage or service centres, when the red check engine light or the pilot comes on. They have no idea of what’s wrong with their car and no way of assessing how serious the issue is until they ask a pro for diagnosis.”

This is where the IoT startup Carnot comes in. “We have smartphones, smart ACs, smart TVs. But there is a massive gap between our cars and the digital technologies that we use and operate every day with just a touch of our fingers. If you’re sitting at home, you wouldn’t know what is happening with your car. Whether it is parked correctly, if it’s in a towing zone, to say the least. We have tried to create a simple and elegant way to bridge this gap,” said Urmil.

Taking On IoT And Merging It With Vehicle Diagnostics: The Carnot Prototype Journey

Carnot founders first created a crude version of the prototype as a proof of concept, a year and a half back.

The prototype consisted of a diagnostic tool that plugs into the car’s diagnostic centre in the dashboard. The firmware (permanent software programmed into a read-only memory) included the patented algorithms which are able to monitor a vehicle’s performance through battery voltage. The vehicle diagnostics then gets transferred to the cloud infrastructure.

Lastly, they created a consumer-facing app available on iOS and Android, which is a SaaS solution and comes with six different modalities in the latest version. The app can be used to check different issues with the user’s car. As per Urmil, the service is free for the first year of download and costs $14 (INR 900) thereafter. “We like to call it the FitBit for your car,” Urmil shares, with a chuckle.

He further adds, “When we got the first prototype, we actually thought of testing it on an Uber. And, the ‘Check Engine’ light blinked red, when we plugged it in and downloaded the app. Not only this, at the same time Carnot prototype also diagnosed the problem with the car as ‘your mass airflow sensor is not working.’ This problem creates fuel diseconomy, which means your average drops and you end up spending more per litre.”

The founders then approached a local Honda dealership to test Carnot for user adoption, positioning and pricing. They also conducted marketing dipstick surveys and found out that car owners were willing to spend more than $109 (INR 7,000) on car security, tracking and diagnostic solutions. “Auto accessories are traditionally hard-to-install, clunky products as opposed to something sexy like a smartphone app. But the one thing we found out was that there was no product like this out there,” claims Urmil.

Decoding The Vehicle Diagnostic Tool And Carnot App

The car diagnostic tool was tested by about 500 users, (the majority of them from Mumbai) in 2016, before rolling out. The components for the plugin model come from the US, Taiwan, China and India. And, as per Urmil, takes about a month after initiating production to arrive at the Mumbai offices, where the firmware is fitted onto the module and it is sent off to the users.

Urmil also shares that one of their main challenges has been building vendor contacts since the components are outsourced from all over the world as well as automating the supply chain. A new development that he shares is that of moving the company’s warehouse to Mumbai from Chennai after GST was announced.

The app, on the other hand, has been developed by co-founder Prathmesh and one of the key things they focused on was getting the customer experience, i.e. UX right. The app deals with different and layered functions of diagnosing the electrical systems of the car. For example, something as simple and basic as checking the location of the car, or nearby available parking spaces, all these come under the safety and security auto accessory model of the Carnot app.

Moving a step ahead, the Carnot app also provides additional details such as trip analysis, for each trip undertaken by the driver. A driver score from 0-100, based on minute details like how smoothly you change gears and drive in general, how fuel efficient a user is and more. These analyses appear in the graphic form and aim to create product stickiness as well as user engagement, resulting in 4,000 MAUs, 50% of which are daily active users, opening the app every two days on average.

As mentioned already, the Carnot tool and app are constantly monitoring the electronic systems inside a user’s car and checking for anomalies and inefficiencies in different parts of the engine – be it oil level, or brake fluid or battery voltage.

The Carnot Business Model: Exploring Strategic Partnerships, Customisations And More

As per the founders, the team conducted extensive surveys before coming to the conclusion that the average car owner is willing to shell out about INR 7,000 to safeguard his automobile. Thus, they launched exclusively on Amazon with an initial pricing of INR 6,900. According to Urmil, they managed to sell about 2,000 units over the course of the first two and a half months which was their entire inventory.

Now, the IoT startup is present at an official experience zone at a Croma outlet in Ghatkopar’s R City Mall. The company has also tied up with Uber wherein they retail the Carnot tool+app as a micro fleet management solution. Urmil explains this as, “A number of car owners have multiple cars and drivers working on Uber. With Carnot plugged into the car, these owners can monitor what the drivers are up to, right from the location of the car to how and where it is being used.”

Car insurance companies is another vertical that Carnot is exploring. So far, no company has been able to provide usage-based premiums, with minutiae of a car available for monitoring. The IoT startup has partnered with ICICI Lombard to provide usage-based premiums on the insurer’s cars.

They are also looking to build customised solutions for car manufacturers, although Urmil refuses to divulge the names of said manufacturers. Carnot has also heavily relied on social media to getting the product in the hands of auto influencers as well as creating user awareness.

On the competition front, Urmil believes that the industry is majorly populated with car security solutions and what they are providing are much more than that. While the safety of the car is primarily addressed, the diagnostic and user experience aspects make it a bit more exciting and engaging for true-blue car enthusiasts. The next differentiator is the plug-n-play feature of the product. As Urmil says, “No expertise is required in order to understand and run Carnot on a car. You can plug it in, download the app and the pairing and installation will take place in under two minutes.”

Perhaps, this is why the IoT startup is raring to establish a presence pan India through the Croma partnership over the next few months. They are also partnering with service centres, providing mechanics and auto experts with the device for car diagnostics that come into the centres. One of the most important future plans Carnot is undertaking is that of creating the Smart Solution for buses and trucks. According to Urmil, the device can be attached to the battery voltage sides of a bus/truck and diagnosed in much the same way as a car is. Taking this solution a step further, they are in talks with State Governments to provide the solution for State-run Road Transport Corporation (SRTC).

In Conclusion

The IoT startup that began with four car enthusiasts looking to figure out the problem red check engine light, the road ahead may seem bumpy but endless, all the same. Owning a car is serious business. Often costing six-eight figures easily for a firsthand, ex-showroom model, urbanites have always had to own a car on their to-do list of ‘making it.’ Thus, car security and maintenance are priorities for the average urban car owner.

On top of it, the Indian auto industry is one of the largest in the world. India is also a prominent auto exporter and has strong export growth expectations for the near future. Further, several initiatives by the Government of India including ‘Make in India’ and the major automobile players in the Indian market are expected to make India a leader in the two Wheeler and Four Wheeler market in the world by 2020.

Also, with India determined to be an electric vehicle nation by 2030, the opportunity is immense for a car diagnostic startup such as Carnot. Leveraging IoT, the founders of the startup have a number of options ahead to scale globally.