Mecho Autotech, a startup that offers automotive spare parts, vehicle repairs and maintenance services, has raised a pre-Series A round of $2.4 million. The company focuses on the Nigerian market, where 90% of the country’s more than 12 million registered cars (mainly second-hand) require regular maintenance to prevent recurring breakdowns.
The company’s main task is to connect vehicle owners (private individuals and fleet owners) with workshops that provide vehicle repair and maintenance. Retail consumers in Nigeria often have three alternatives for carrying out car repairs: using OEM mechanics, aftermarket mechanics or roadside mechanics. Because auto parts are made in-house, OEM technicians provide high-quality but expensive services. On the other hand, most car owners can afford the services of aftermarket and roadside assistance technicians, which are of lower quality.
Since its founding in 2021, Mecho Autotech has seen more than 6,000 cars from B2B and B2C customers undergo repairs and maintenance in more than 110 authorized workshops (three of which are owned). In addition, the majority of the problems the company has encountered in fulfilling these repair and maintenance requests have stemmed from obtaining high-quality replacement parts, CEO Olusegun Owoade said in an interview.
Mecho Autotech said last January that part of the seed funding will be used to grow the after-sales spare parts value chain. Likewise, the company will double its wholesale distribution of these parts with its current pre-Series A investment.
Expansion into wholesale spare parts distribution
Nigeria’s spare parts and maintenance business in the automotive aftermarket is estimated to be worth $8 billion. Spare parts account for 80% of the value, with Nigerian car owners paying an average of $650 per year. With over 12 million registered vehicles, 90% of which are imported and second-hand, Nigeria’s automotive aftersales industry is highly fragmented and informal. This results in a disjointed supply chain for aftermarket spare parts.
“As you know, spare parts are imported into the country because we do not have local production. More than 95% of the companies involved in this spare parts value chain are small and informal, with technical knowledge and distribution channels,” Owoade said.
“But because of their size, they work together to import parts into the country, but therefore the inventory is not robust and the quality is not uniform. It was necessary for us to be involved. And whatever helped with that decision. If you look at the distribution of market share or market opportunity, it is usually between 80% and 20% between spare parts and service costs.”
Mecho Autotech has found a partner in Tokyo-based venture capital firm Global Brain Corporation to support its new approach to managing the import and distribution of after-sales spare parts. According to Owoade, Global Brain Corporation, one of the startup’s investors in this round, would connect Mecho Autotech with Asian parts manufacturers interested in supplying the African market.
“We see a significant opportunity in the growth of the automotive aftersales market in Nigeria,” Hiroto Sorita, the company’s director of operations, said of the investment. “Global Brain will support Mecho in sourcing parts from Asian suppliers and in business development for the new services to penetrate this fragmented market.”
Ventures Platform and Uncovered Fund are the other investors involved in the round.
Supply chain tailor-made apps for the aftersales and maintenance market
The two-year-old company, which operates across Nigeria, will act as an importer, supplying spare parts inventory to over 150 parts suppliers, whose distribution network will meet the demands of workshop owners and end customers. This prevents stockpiling of in-demand spare parts, such as tires, suspension parts, brakes and batteries.
As a result, Mecho Autotech’s search for wholesale spare parts overcomes the inventory problem faced by parts dealers. Meanwhile, these suppliers also face inventory financing concerns that arise from business customers paying several days or weeks after a service is completed.
![Mecho Autotech](https://techcrunch.com/wp-content/uploads/2023/09/3DA60CD7-F06E-41CC-A855-6A8720FAC282.jpeg?w=680)
Image credits: Mecho Autotech
Accordingly, in Q4 2023, Mecho Autotech will develop an app that will allow suppliers to receive inventory financing and manage their inventory sales; The same service will enable workshops to access working capital and acquire spare parts, Owoade said. Similarly, a separate app for commercial fleet owners will allow them to find authorized workshops, receive maintenance financing and manage vehicle maintenance data.
“We continue to connect individuals and fleets with vehicle repair and maintenance shops. As we have entered the spare parts value chain, we see an opportunity to connect it to the original business by generating demand for spare parts from parts suppliers through the app,” said the CEO who co-founded the startup with Ayoola Akinkunmi.
“We also see the app as a tool for workshops to purchase spare parts and gain immediate access to working capital financing. As the number of workshops on the network grows, we can expand consumers’ need for car repairs to them. We have also developed free software to help fleet owners manage end-to-end operations, including visibility, maintenance and fulfillment services.”
Mecho Autotech will collect data on spare parts demand from these individual applications, suitable for the different stakeholders in the supply chain to assess the market supply. These supply chain stakeholders will have access to up to ₦10 million (~$10,380) in financing (inventory financing for vendors, working capital for workshop owners, and vehicle maintenance and parts procurement for commercial fleet owners), according to the startup.
Owoade noted that the source of funding comes from banking partnerships; Mecho Autotech currently has access to a ₦650 million (~$675,270) line of credit from a single banking partnership. The company, whose main revenue comes from commissions on vehicle repairs and additional income from maintenance subscriptions, is in talks with other banks to increase its credit line, the CEO said.