Mecho Autotech, a startup providing automotive spare parts, automobile repairs and upkeep providers, has raised a $2.4 million pre-Series A spherical. The agency targets the Nigerian market, the place 90% of the nation’s greater than 12 million registered automobiles (primarily used) require common upkeep to keep away from recurring breakdowns.
Its major enterprise connects automobile house owners (people and fleet house owners) with workshops that deal with automobile repairs and upkeep. Retail shoppers in Nigeria typically have three alternate options for performing vehicle repairs: make the most of OEM mechanics, aftermarket mechanics, or roadside mechanics. Because vehicle parts are made in-house, OEM technicians present high-quality however expensive providers. On the opposite hand, most automobile house owners can afford the providers of aftermarket and roadside technicians, which have much less high quality.
Since its inception in 2021, Mecho Autotech has seen greater than 6,000 automobiles from B2B and B2C purchasers bear repairs and upkeep from over 110 accepted workshops (three of which it owns). In the method, the vast majority of the problems the agency has had in executing these restore and upkeep requests have come from buying high quality substitute parts, based on CEO Olusegun Owoade in an interview.
Mecho Autotech stated final January {that a} portion of its seed funding will likely be used to develop its after-sales spare parts worth chain. Similarly, the enterprise will double down on wholesale distribution of those parts with its present pre-Series A funding.
Expanding into wholesale spare parts distribution
Nigeria’s automotive aftermarket spare parts and upkeep enterprise is estimated to be value $8 billion. Spare parts account for 80% of the worth, with Nigerian automobile house owners paying a median of $650 yearly. With over 12 million registered autos, of which 90% are imported and pre-owned, the automotive after-sales business in Nigeria is extremely fragmented and casual. This leads to a disjointed aftermarket spare parts provide chain.
“As you know, spare parts are imported into the country as we have zero local manufacturing. More than 95% of the businesses engaged in this spare part value chain are small and informal with technical know-how and distribution channels,” stated Owoade.
“But because of their size, they band together to import parts to the country, but because of that, inventory is not robust and quality isn’t uniform. There was a need for us to get involved in that. And what also helped that decision. If you look at the breakdown of market share or market opportunity, it is typically 80%-20% between spare parts and service charge.”
Mecho Autotech secured a accomplice in Tokyo-based enterprise capital agency Global Brain Corporation to assist its new path of managing the importation and distribution of aftersales spare parts. According to Owoade, Global Brain Corporation, one of many startup’s buyers on this spherical, would join Mecho Autotech to Asian aftermarket parts makers all for supplying the African market.
“We see a significant opportunity in the growth of the automotive aftersales market in Nigeria,” Hiroto Sorita, the agency’s company director, stated of the funding. “Global Brain will support Mecho on parts procurement from Asian suppliers and business development for the new services to penetrate this fragmented market.”
Ventures Platform and Uncovered Fund are the opposite buyers concerned within the spherical.
Supply-chain-tailored apps for the after-sales and upkeep market
The two-year-old agency, which operates throughout Nigeria, will act as an importer, supplying spare parts stock to over 150 parts distributors, whose distribution community will meet the calls for of workshop house owners and finish clients. This will forestall stockpiling in-demand spare parts like tires, suspension parts, brakes and batteries.
As a outcome, Mecho Autotech’s foray into wholesale aftersales spare parts overcomes the stock downside that parts sellers confront. Meanwhile, these distributors additionally battle with stock finance issues arising from enterprise purchasers who pay a number of days or even weeks after a service is accomplished.
Consequently, Mecho Autotech will develop an app in This autumn 2023 permitting distributors to obtain stock finance and handle their stock gross sales; the identical service will allow workshops to entry working capital and purchase spare parts, Owoade stated. Similarly, a separate app for company fleet house owners will enable them to search out accepted workshops, obtain upkeep finance and handle automobile upkeep knowledge.
“We’re still connecting individuals and fleets with vehicle repairs and maintenance workshops. Now that we’ve entered the spare parts value chain, we see an opportunity to connect it with the original business by generating demand for spare parts from parts vendors via the app,” remarked the CEO.
“We also see the app as a tool for workshops to purchase spare parts and directly access working capital financing. As the number of workshops on the network grows, we can upsell and push consumers’ need for car repairs to them. We also developed free software for fleet owners to manage end-to-end operations, including visibility, maintenance and fulfillment services.”
Mecho Autotech will accumulate knowledge on spare parts demand from these particular person functions suited to the varied provide chain stakeholders to evaluate market provide. These provide chain stakeholders will entry as much as ₦10 million (~$10,380) in financing (stock financing for distributors, working capital for workshop house owners and automobile upkeep and parts procurement for company fleet house owners), based on the startup.
Owoade famous that the supply of the financing is through financial institution partnerships; Mecho Autotech at the moment has entry to a credit score line of ₦650 million (~$675,270) from a single financial institution partnership. The agency, whose main income comes from commissions on automobile repairs and ancillary revenues from upkeep subscriptions, is in talks with different banks to extend its line of credit score, based on the CEO.
…. to be continued
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