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Carro’s unicorn status intensifies competition between Southeast Asia’s car marketplaces

Written by Khamila Mulia Published on     4 mins read

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Besides Carro, Malaysia’s Carsome is reportedly raising new funding that will lead to a USD 1 billion valuation.

Southeast Asia is an attractive market for secondhand cars. Sales of used vehicles are 30% higher than those of new vehicles, according to a report by Mordor Intelligence. Thanks to the increasing penetration of the internet and smartphones, over 70% of used car dealers in the region use online channels to market their products, supporting the rapid growth of automotive marketplace platforms, especially in Indonesia, Thailand, and Malaysia.

Players in this segment include Carro, Carsome, OLX Autos (previously known as BeliMobilGue), Carmudi, and iCar Asia. However, two companies are currently racing ahead—Singapore’s Carro and Malaysia’s Carsome.

Carro recently made headlines as it entered the unicorn club, following a USD 360 million funding round led by SoftBank Vision Fund 2. Meanwhile, Carsome is reportedly in talks to raise USD 200 million, which will help the company reach a USD 1 billion valuation. Carsome declined to comment on the matter.

Beyond the marketplace

“If we compare Carro and Carsome with others, we can see how they became the dominant players,” said Eko Kurniadi, partner at Alpha JWC Ventures, which is also an investor in Carro. “Both are available in multiple countries, including Indonesia, Malaysia, Singapore, and Thailand. Both offer more than just sales. They provide various services, from inspection to financing, and both have a seamless online and offline presence.”

Kurniadi points out that this is not just about automotive e-commerce anymore. “There’s only so much you can do if you’re talking about marketplaces,” he said. “When it comes to secondhand cars, you have to provide end-to-end services to help the customers seeking vehicles and owners wanting to sell.” That is where Carro and Carsome excel—both understand the pain points and offer solutions.

The two platforms were founded in 2015 and are now showing positive growth. In a previous interview with KrASIA, Carro CFO Ernest Chew said that the site has over 1 million monthly active users and SGD 1 billion (USD 740 million) annualized gross merchandise value. Carro hit profitability last year, closing the financial year ending March 2021 with over 2.5x in revenue growth. It continues to be EBITDA positive for the second year running. Carsome, meanwhile, said last month that it is on track to hit an annualized USD 1 billion in revenue by the end of the second quarter.

Read this: Carro hits profitability in 2020, may opt for IPO soon | Q&A with CFO Ernest Chew

When it comes to financing, Carro has more comprehensive offerings through its subsidiary Genie Financial Services, including loans to dealerships and consumers, as well as insurance. In December, the firm launched the region’s “first AI-powered behavior and usage-based insurance program,” allowing customers to buy personalized premiums based on their driving behavior. Carro was part of the Razer Youth Bank consortium that applied for a digital banking license in Singapore, although it failed to acquire a license.

Carsome, on the other hand, seems more focused on partnerships and diversified sales channels. Last year, Carsome Malaysia partnered with Shopee to sell used cars through the e-commerce platform, allowing prospective buyers, especially first-time buyers, to browse Carsome’s catalog more easily. This was a strategic move for the company, as Shopee leads the Malaysian e-commerce landscape with nearly 47 million web visits every month, according to iPrice.

Top executives of both platforms have expressed their intention to go public. Carsome is reportedly eyeing a US listing via a SPAC merger, seeking a valuation of USD 2 billion, according to Bloomberg. Carro CEO Aaron Tan told KrASIA that although an IPO is in its roadmap, the company doesn’t have an exact timeline. “Going public depends on market conditions; it is not something you do overnight,” he said. “It’s something we’ve started planning two years ago. There is a lot of work to do and lots of compliance checks. The company is not 100% IPO-ready, but it’s almost there.”

More growth after the pandemic

COVID-19 had a positive impact on used car sales. Amid economic uncertainty, customers have become more price-sensitive with regard to car purchases. Kurniadi believes this trend will continue after the pandemic. “As the economy is slowly recovering, so is the market,” he said. “The upper-middle class will continue to buy new cars and sell their old ones, while the lower middle class will have higher quality options.”

Used cars from metropolitan areas are in demand in second and third-tier cities. In an emerging country like Indonesia, car ownership is a culture and a symbol of achievement, so the demand will always increase, Kurniadi said. The automotive e-commerce sector will continue to grow as more people get used to buying online. Buyers will look for related information and offerings. End-to-end services, as well as financing, will grow the sector and its adoption, he added.

However, there are also various challenges for companies like Carro and Carsome. Since a car is a major purchase, many consumers are still not confident enough to keep the entire transaction process online. The platforms are therefore focused on providing a seamless experience. While online services can cut time and cost of searching, as well as the handling of documents and possibly insurance, offline support provides reassurance about the item the customer is buying.

Both Carro and Carsome have a strong offline presence. Carro runs about 50 showrooms regionally, the largest being in Indonesia, while Carsome also has several brick-and-mortar “experience centers” across the region.

“Time, price, and transparency are key factors for both sellers and buyers,” said Kurniadi. “Innovation in technology should be able to improve and address this, and deliver a better, faster, and overall positive experience.”

Read this: ‘More customers will choose used cars over new vehicles in 2021,’ says Carsome CFO Juliet Zhu

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