Nasdaq-bound Zoomcar takes SPAC route despite bear warnings

By renting out two cars on Zoomcar, a web designer in India reportedly earned more than what her stock investments gave her in the eight months. In fact, she plans to invest in a third car to add to her secondary source of income.

Zoomcar has over 25,000 vehicles listed on its platform in four different markets as it connects customers to “hosts” or car owners. While the company has been around for a decade, it’s only been two to three years since it started transitioning to becoming an Airbnb for cars.

If there’s one thing that can be said about the India-headquartered startup, it’s this: Zoomcar is far from being resistant to change. It has adopted multiple tactics over the years, and the latest one was in the works before the onset of Covid-19.

Zoomcar CEO and co-founder Greg Moran / Photo credit: Zoomcar

The pandemic “distorted operating realities,” Greg Moran, the car rental firm’s co-founder and CEO, tells Tech in Asia. It was only around mid-2021 that Zoomcar was able to effectively make the transition to a 100% marketplace or peer-to-peer model.

The company now stands at the cusp of a Nasdaq listing slotted for the second quarter of 2023. In October, it merged with a blank check-firm in a deal worth US$456 million.

At a time when most companies are putting their IPO plans on hold, the Sequoia Capital-backed firm has no intention of hitting the brakes. “The dynamics are pretty clear for us. We’ve seen over 6x growth in business volumes over the last five quarters,” says Moran.

“We are not really in any way concerned or troubled by any of the near-term market gyrations,” the CEO explains. He attributes this confidence to Zoomcar’s recent performance. “We’ve been able to demonstrate consistent growth quarter over quarter in terms of supply and demand as it relates to bookings and revenue volume.”

Wheels on the SPAC go round and round

Based on current conditions, Moran expects the business to grow “several orders of magnitude over the next couple of years.”

“We’ve taken significant steps to be sustainably profitable,” he says, adding that the company’s overall contribution margin has become positive in the past quarter. This means Zoomcar is making money on each transaction.

Contribution margin improved by 90% from April to August 2022, according to the company’s investor presentation. “The public markets have started to really value companies that have low cash burn, clear unit economics, and clear paths to long term opportunities,” observes Moran.

Given the “significant tailwinds” as the world emerged from Covid, Moran says people from inside and outside the company realized that listing now is “a tremendous opportunity” for Zoomcar to position itself for the long term. Since the firm is currently in four countries and expects to be in more markets soon, the goal is to find a “global home” that can accommodate its “broader business ambitions and desires.”

He also thinks that when it comes to a public transaction like a SPAC deal, one can “showcase with a little bit of granularity how the business can really evolve in the near to medium term.” This, in turn, provides “a lot of visibility and comfort to public market investors and potential future shareholders.”

Moran believes that besides being time-efficient, the SPAC route also gives more certainty in the current market environment.

A brief history of changing gears