SUMMARY
Prorata Car is a fractional car-ownership platform that bands together up to 12 homeowners in a residential society and allows them co-own cars
The startup plans to onboard 10 Lakh+ users and sell around 1 Lakh cars in the next four years
The startup raised $125K from high-net-worth individuals last year
Being a car enthusiast and a finance guy, the idea of building a business at the intersection of these two domains was something that Sanjeev Jain would often visualise.
At a time when decentralised finance (DeFi) was gaining momentum around the globe, Jain decided to sit with his long-time collaborator and a techie, Mohit Bhansali, to talk about his brainchild. He floated the idea to make Indians co-own their dream cars, Beamers, Mercs, JAGs, Porsches, and the list was long.
Over the next few months, the duo ironed out the details of Sanjeev’s vision, and decided to build a fractional car ownership platform – Prorata.
Launched in December 2021, Prorata Car is a fractional car-ownership platform that bands together up to 12 homeowners in a residential society and allows them to buy 8.33%, or 1 ticket, of the total ownership of the car. This ‘1 ticket’ guarantees an individual usage of 30 days in a year.
The startup has capped the maximum ownership at 25% and a minimum of four users to purchase one car. Accordingly, users can reserve the dates on the Prorata app for subsequent usage.
In essence, the startup pools money from each of the interested users and then transfers it into an escrow account. The money is directly deposited into the account of the car dealer, who then releases the car in favour of the users.
In the words of the cofounders, the startup’s target market is individuals who already own a primary four-wheeler, or a couple of cars, and fancy a more pricey dream car.
The startup has so far raised $125K from high-net-worth individuals. The funding was largely deployed towards educating users and scaling up the platform.
Grinding Through The Early Stage
The early-stage startup is currently focused on educating its audience and plans to deploy and sell the first batch of 30 cars by March or April.
“We have set our eyes on onboarding more than 10 Lakh users and selling around 1 Lakh cars in the next four years,” Sanjeev shared his projections with Inc42.
As of now, the founders plan to generate income from just one source, i.e, annual maintenance costs. According to Sanjeev, the startup will charge anywhere between INR 20,000 and INR 1 Lakh per user, depending on the price of the car. With this, the startup will take care of the overheads related to a vehicle, including service, maintenance, and insurance costs.
In response to Inc42’s questions about whether the platform entails high capital expenditure, the CEO said that Prorata operates on an asset-light model, which simply means it does not own any asset. Calling Prorata an asset management company, Jain said that the car sold on the platform is registered under an LLP and does not entail any expenditure mandate for the startup.
At the end of five years, the vehicle is sold to the highest bidder at a depreciated value.
Riding The Social Media Wave
At the outset, the startup ran an offline pilot to understand the on-ground response of its product. Prorata reached out to residential societies in Bengaluru and offered co-residents to form groups to purchase a car.
The CEO said that the Phase-I trial was not exactly a eureka moment. He cited the absence of such a fractional car ownership model in the market and a lack of trust in the new space as primary reasons behind the startup’s initial setback.
It was probably time to revisit the marketing strategy. So, with chalk in hand and a blackboard in front, the cofounders spent weeks creating playbooks to decode their potential market and unlock the real user base.
“We realised that we first need to build trust and that could be achieved by building a community around the idea of fractional ownership. While Phase-I was not overtly successful, we realised that we need to educate users and then sell our product. We found out that we need to develop the market so users can download the app and interact within the community. From there, we can easily scale up,” said the chief marketing officer Sakshi Bansal, who joined the startup as a cofounder in June 2022.
“The results have been great since then. Our platform’s Instagram handle has gone viral in the past three months,” the cofounder said, adding that the app has notched up 1 Lakh+ downloads and lapped up more than 16 Mn impressions on various video-sharing platforms since December 2022.
Sanjeev said that the startup has also received paid intent from more than 350 cities across the country. However, he did not give a breakdown of individual requests.
Addressing Elephants In The Room
The fractional car co-ownership space is yet to see its dawn in India and is still in its infancy, therefore could pose many unforeseen challenges. However, it appears that the cofounders of the startup are already ahead of this curve in anticipating any unforeseen blows.
Imagine a situation where one day, a stakeholder decides to surrender his/her ownership. Responding to this, Sakshi said that the startup plans to hire asset managers, beginning April, to tackle such situations.
She added that in the event of a user leaving a co-ownership group, the platform would help the exiting partner find a replacement from the community of car enthusiasts listed on the Prorata app.
Further, how does the company plan to resolve the conflict arising from the usage of the vehicle during peak season, especially during festivals and holidays?
For this, the startup has a reservation mechanism on the app, which primarily operates on a first-come, first-served basis, allowing ticket owners to block a vehicle for any 30 days of their choice in a year.
Finally, the startup plans to keep at bay the conflicts arising from the wear and tear of a vehicle co-owned by up to 12 people, with its maintenance policy.
Perks Of Tapping Into A Niche Market
Even though the luxury car market forms a smaller portion of the total auto sales in India, the startup claims that there is no dearth of opportunities in this arena.
As per the latest industry data, 37,000-38,000 luxury vehicles were sold in the country last year, growing nearly 50% YoY.
In absolute terms, the Indian luxury car market is projected to grow to $1.54 Bn by 2027. This represents a big market opportunity for players like Prorata, albeit a smaller volume.
While Prorata hosts a range of cars from family cars to luxury SUVs, the global fractional car ownership format operates on a completely different wavelength.
On the global level, the industry is largely limited to much pricier supercars. The leaders in this space are platforms such as Switzerland-based Supercar Sharing, US-based Auto Timeshare, and Rally.
In India, many platforms have previously tinkered with the space and Prorata Car is not the first entrant. Back in 2005, a Bengaluru-based startup named General Mechanics emerged with a similar co-ownership concept, allowing users to buy luxury cars for a fraction of its price. As of now, there is no trace of General Mechanics available on the internet.
While India has already seen the rise and fall of such a model before, the fact that the economy has matured with time and there is more disposable income in the hands of various classes of society cannot be ignored.
Given the scenario, the startup coming up with an affordable solution to own a dream vehicle holds a lot of potential, even though the road ahead is peppered with challenges.
