Mecho Autotech, a startup providing automotive spare components, car repairs and upkeep companies, has raised a $2.4 million pre-Sequence 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 car homeowners (people and fleet homeowners) with workshops that deal with car repairs and upkeep. Retail shoppers in Nigeria usually have three alternate options for performing car repairs: make the most of OEM mechanics, aftermarket mechanics, or roadside mechanics. As a result of car components are made in-house, OEM technicians present high-quality however dear companies. However, most automotive homeowners can afford the companies 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 shoppers bear repairs and upkeep from over 110 accredited workshops (three of which it owns). Within the course of, nearly all of the problems the agency has had in executing these restore and upkeep requests have come from buying high quality alternative components, based on CEO Olusegun Owoade in an interview.
Mecho Autotech mentioned final January {that a} portion of its seed funding shall be used to develop its after-sales spare components worth chain. Equally, the enterprise will double down on wholesale distribution of those components with its present pre-Sequence A funding.
Increasing into wholesale spare components distribution
Nigeria’s automotive aftermarket spare components and upkeep enterprise is estimated to be value $8 billion. Spare components account for 80% of the worth, with Nigerian car homeowners paying a mean of $650 yearly. With over 12 million registered automobiles, 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 components provide chain.
“As you already know, spare components are imported into the nation as we’ve got zero native manufacturing. Greater than 95% of the companies engaged on this spare half worth chain are small and casual with technical know-how and distribution channels,” mentioned Owoade.
“However due to their dimension, they band collectively to import components to the nation, however due to that, stock is just not sturdy and high quality isn’t uniform. There was a necessity for us to get entangled in that. And what additionally helped that call. If you happen to have a look at the breakdown of market share or market alternative, it’s usually 80%-20% between spare components and repair cost.”
Mecho Autotech secured a companion in Tokyo-based enterprise capital agency International Mind Company to help its new path of managing the importation and distribution of aftersales spare components. In accordance with Owoade, International Mind Company, one of many startup’s traders on this spherical, would join Mecho Autotech to Asian aftermarket components makers thinking about supplying the African market.
“We see a major alternative within the development of the automotive aftersales market in Nigeria,” Hiroto Sorita, the agency’s company director, mentioned of the funding. “International Mind will help Mecho on components procurement from Asian suppliers and enterprise growth for the brand new companies to penetrate this fragmented market.”
Ventures Platform and Uncovered Fund are the opposite traders concerned within the spherical.
Provide-chain-tailored apps for the after-sales and upkeep market
The 2-year-old agency, which operates throughout Nigeria, will act as an importer, supplying spare components stock to over 150 components distributors, whose distribution community will meet the calls for of workshop homeowners and finish clients. This may forestall stockpiling in-demand spare components like tires, suspension components, brakes and batteries.
Consequently, Mecho Autotech’s foray into wholesale aftersales spare components overcomes the stock downside that components sellers confront. In the meantime, these distributors additionally wrestle with stock finance issues arising from enterprise shoppers who pay a number of days or even weeks after a service is accomplished.
Picture Credit: Mecho Autotech
Consequently, Mecho Autotech will develop an app in This fall 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 components, Owoade mentioned. Equally, a separate app for company fleet homeowners will enable them to seek out accredited workshops, obtain upkeep finance and handle car upkeep information.
“We’re nonetheless connecting people and fleets with car repairs and upkeep workshops. Now that we’ve entered the spare components worth chain, we see a possibility to attach it with the unique enterprise by producing demand for spare components from components distributors by way of the app,” remarked the CEO.
“We additionally see the app as a device for workshops to buy spare components and instantly entry working capital financing. Because the variety of workshops on the community grows, we will upsell and push shoppers’ want for automotive repairs to them. We additionally developed free software program for fleet homeowners to handle end-to-end operations, together with visibility, upkeep and achievement companies.”
Mecho Autotech will accumulate information on spare components demand from these particular person purposes suited to the assorted 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 homeowners and car upkeep and components procurement for company fleet homeowners), based on the startup.
Owoade famous that the supply of the financing is by way of financial institution partnerships; Mecho Autotech at present 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 car repairs and ancillary revenues from upkeep subscriptions, is in talks with different banks to extend its line of credit score, based on the CEO.