By Lisa Thompson

 NASDAQ:ZCAR

Peer-to-peer (P2P) car sharing is a new and growing industry that competes with traditional car rental companies. Rather than renting access to a company-owned fleet (B2C), car sharing allows owners of cars to rent their own vehicles directly to consumers through a platform (P2P) and charges a fee for the services. The industry looks to emulate other successful shared economy businesses such as Airbnb, etc., which are platforms for property owners to rent real estate directly to consumers. Car sharing is taking shape to become a big industry segment globally. The total addressable global car-sharing market is expected to reach $14 billion by 2025 according to Statistica. The US is expected to generate about $3 billion in 2025, which is dominated by Turo, but that leaves a huge headroom for other markets, especially in emerging economies such as India.

Zoomcar (NASDAQ:ZCAR) is the largest and the most well-known car-sharing app in India that currently commands an impressive market share. Since India has a low car ownership ratio compared to its population and purchasing power, aided by a vastly improved and connected road infrastructure, Zoomcar’s business model is well-suited and makes a very compelling case in India and all emerging economies. According to Statistica, the car-sharing market in India is expected to reach $85.7 million this year and to grow at a steady CAGR of 7.7% from 2025 to 2029.

Zoomcar was founded in 2013 and is headquartered in Bangalore. It started as a traditional car rental company which was asset-heavy but used a mobile app. Thereafter it successfully pivoted to being the pioneer of the self-driving car-sharing platform in India. This eliminated the cost of owning a fleet of cars. Zoomcar today has the largest market share in India with the greatest geographic reach spanning over 99 cities. Renters (Guests) can rent cars by the hour, day, week, or month. It has over 25,000 cars on its platform and the management is laser-focused on growing the supply side (Host) continuously. The company generated over 103,000 bookings in its latest reported quarter. Renters can either have cars delivered to their location or they can pick them up at one of Zoomcar’s fulfillment centers. The company offers car owners services at these centers for a fee. At Zoomcar’s fulfillment locations the process is made seamless. One can hand over keys and cars plus all car’s immediate maintenance needs such as cleaning, fueling, and other services are undertaken which greatly improves the Host and Guest renting experience. The convenience of the fulfillment centers is proving to be very popular with car owners and guests thus the company is adding more locations in the geographic areas as per demand to increase the supply of cars and improve the car quality ratings. The company believes that adding more high-quality and highly rated cars in more strategic locations will surely accelerate growth and therefore it has shifted its efforts in that direction. Another major initiative has been to seek out companies with corporate fleets and encourage them to rent them out during idle times.

Competitive Landscape

There are several other competitors to Zoomcar in India such as: 

Drivezy, founded in 2015, is based in Bengaluru, Karnataka, India. It offers mopeds as well as cars. It has both its own fleet, as well as a platform offering privately owned cars.

Revv, based in Gurugram, Haryana, India was bought by CarDekho in December 2023. It is a popular offering in urban areas and has a range of vehicles. It also offers a subscription service for rentals. There is no information about what CarDekho paid for Revv, but it was valued at $138 million in a 2019 funding round.

Ola is also headquartered in Bengaluru and offers rides as well as car sharing. It has a large number of drivers competing with Uber. In addition to cars, Ola rents bikes, cabs, and auto-rickshaws (small three-wheeler cars).

BluSmart Mobility is an all-electric car-sharing and ride-hailing platform, operating mainly in Delhi-NCR and Bangalore. Its operations are based out of Gurugram, Haryana, and it was founded in 2019.

Transformation of the Company in Recent Years

Like in the early days of Airbnb, companies in the car-sharing industry in India are small and we believe that they are all still losing money, making investing risky. Back in 2015, when many of these companies started up, the industry had good prospects, revenues grew and valuations soared. In FY2020, Zoomcar had revenues over $35 million, but the pandemic shutdown wreaked havoc and caused valuations and revenues to plunge. Revenues bottomed at $8.8 million in FY 2023. The company became public in December of 2023 (FYQ3 2024) when it merged with a SPAC. The deal had an implied pro forma enterprise value of approximately $456 million. 

In mid-2024, the company underwent a change in management. Under new management, Zoomcar has begun to recover, making strides in reducing losses, and is bringing in operating efficiencies. It has been working to settle several lawsuits, including one from its founder, who was terminated. In addition, it has been renegotiating legacy loans and vendor payments and recently has been successful at raising new capital and restructuring debt. Also on a positive note, the company has been slowly improving in many aspects for the last five quarters, evident in its positive and increasing contribution margin.

Improving Financial Position Under New Management

In calendar year 2024, Zoomcar generated $9.1 million in revenues. For the quarter ending December 31, 2024, the company reported revenues of $2.4 million, flat with last year, while significantly decreasing losses as the new management team redirected spending to increasing high-quality inventory rather than enticing new renters. So rather than spending on advertising to bring in more renters, the focus is now on improving the quality ratings of the cars on the platform by making sure they are, for example, clean, in good condition, and fueled up. This new focus is reducing the bottleneck to growth. While revenues have not been growing, volumes have increased as a result of increased shorter-duration bookings, and bookings that remain yield lower losses. In the quarter, gross margins rose to 38.8% from 13.6% while losses from operations declined to $3.2 million from $11.7 million in last year’s quarter. Adjusted EBITDA loss declined to $3.1 million from $10.2 million in last year’s quarter. The company has been raising cash and at the end of 2024, Zoomcar had $14 million in debt and negative working capital of $41 million. Since the end of the year, Zoomcar raised money to pay off accounts payable related to a lawsuit and thereby reduced negative working capital.

Capitalization of the Company

Zoomcar is also working to regain compliance with NASDAQ, it needed both to comply with the one-dollar share price rule and the stockholder’s equity minimum. Shareholders approved a potential reverse split and the company has also applied to be listed on the NASDAQ Capital Market if it cannot reach compliance with the equity rule.

On March 21st, the company executed a reverse split of its issued and outstanding common stock at a ratio of 1-for-20. As of March 24th, the company had 710,000 primary shares outstanding, yielding a market cap of $3.7 million and an enterprise value of $13.3 million (using December 31st cash and debt levels). Adding in in-the-money warrants and options to get a fully diluted share count would yield an enterprise value of $20.6 million. Based on the December quarter, this is 2.1 times the EV-to-revenue run rate. 

It is Still Early Days for Car Sharing in India

While Zoomcar is far from out of the woods, it is making progress and is selling at a fraction of its previous valuation. Car sharing in India makes financial sense as a product with a large addressable market. If Zoomcar can make car sharing into a profitable business, by lowering costs further and raising revenues, it presents an extremely attractive risk-reward case for investors at this low valuation.

Bottomline, the company has been making impressive strides to become profitable, reaching its peak contribution profit in December 2024. Although it has a lot of work ahead of it, Zoomcar’s new management is focused on not only continuing as a leading brand in India but becoming a global brand as well.

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