OLX Group invests up to $400M in used car marketplace Frontier Car Group at $700M valuation

Our experience in India is a great proof of concept, where within the space of a year, our joint venture has already increased the number of stores threefold, with car purchase volumes continuing to grow by 10% month-on-month.”This is the second time that OLX has invested in Frontier: in May 2018, Naspers had invested $89 million in the business, an investment that came just weeks after Frontier had raised $58 million from Balderton, TPG and others.The deal underscores the longtime trend of consolidation in e-commerce businesses — something Prosus is also seeing played out in a completely different arena, that of food delivery.The basics of the economy-of-scale principle, as applied to used car sales, goes something like this: economies of scale makes a platform more useful (there will be more cars on it, and less on competitors’ sites); but it also potentially means that Frontier would be making more transactions, thereby more revenues overall; and building and running more sales on the same platform improves the margins on the investment that gets made in building and operating that platform.Targeting P2P used car sales in emerging markets is a big potential business: in part because of the nature of those economies, car owners are more likely to sweat out assets rather than go for buying completely new vehicles.