When it comes to selling a used car, Carsome CEO and co-founder Eric Cheng believes that pain points exist almost everywhere in the world. There are many sites that host listings for vehicles, but do not address the issue of pricing and lack measures to guarantee the cars are inspected properly.
Founded in 2015, Carsome started off as a site for comparing automobile prices, but transformed into a trading platform for used cars after just six months, facilitating bids from car dealers. Four years later, Carsome now offers a one-stop solution for everything related to auto-trading—listings, bids, logistics, payments, inspections, and ownership transfers.
The startup, which recently raised USD 50 million in Series C funding, has about 6,000 dealers using its platform across 50 cities in Malaysia, Thailand, Indonesia, and Singapore. The new funds will help Carsome fend off competition in the region’s used car business, which is estimated to worth USD40 billion in sales.
KrASIA recently spoke with Cheng about Carsome’s plans to drive into new markets and offer new services in 2020.
KrASIA (Kr): Congratulations on securing your Series C investment. Carsome operates in Malaysia, Indonesia, Thailand, and Singapore. How will the new funds strengthen your regional presence?
Eric Cheng (EC): The Philippines has been part of our plan for 2020, and this will mostly likely be through a joint venture format. If you look at how we expanded in the company’s early days, specifically to Indonesia and Thailand in the first 12 months of business, it was partly due to the size of the market for used cars.
Collectively, in Malaysia, Indonesia, and Thailand, about 4 millions used cars are being traded on an annual basis, at 10% year-on-year growth. Therefore, it’s natural for us to be in the fourth largest used-car market in the region—that would be the Philippines.
It seems that the infrastructure and technology in the Philippines are not advanced compared to other countries that we’re in right now. In terms of competition, we don’t see any similar players. I think we are considering a few M&A opportunities in the Philippines and would not limit ourselves to fully building everything from scratch.
At the regional level, there is a lot of room for us to grow and capture more market share. We have only captured about 1% of the used car market in the countries that we’re in right now. The goal next year is to bring that up to 2–3%.
Kr: We know that Carsome will also expand vertically in order to become an end-to-end marketplace for used cars. How do you ensure that such vertical expansion to financial services will not hinder your goal to become profitable in your core markets?
EC: Beyond expanding horizontally to a new country such as the Philippines, we are going to expand vertically, offering everything that is related to the car-trading process. In 2019, we started a B2C financing scheme in Malaysia and Indonesia to support dealers and car buyers, and have accumulated a USD 4 million loan book.
That was implemented before the Series C announcement. The pilot successfully attracted capital investment from multiple banks such as MUFG, which owns both PT Bank Danamon and Krungsri, which are among the biggest banks in Indonesia and Thailand. Our goal right now is to add other financing services, such as insurance and warranty programs, with these collaborations. It creates more revenue for the business and helps create an end-to-end marketplace on our current platform. We not only want to help people sell cars, we will give them access to financing options when they buy used cars from our platform and through the dealers.
We have always emphasized profitability within the company. I don’t think the money that we have to spend would affect our profitability. In fact, it’s just expanding our offerings to cover more services on the platform. We are already operationally profitable in Malaysia, and will be so in Indonesia and Thailand by the end of 2020.
Kr: What are your concerns before scaling up across the region?
EC: Market size is the first thing that we look at. The second thing is finding and working with the local talent. We always start with finding good talent locally. From there, we use our knowledge from Malaysia to bring in the experience, data, and technology.
In terms of localization within the used car marketplace, you need to understand consumers’ behavior, whether they are accessing your platform through mobile environments or desktop computers. For example, in Indonesia, almost 100% of people access the auction offerings on our platform through mobile phones. A lot of them don’t really own a laptop, which means you have to design a mobile-first product strategy to tackle countries like Indonesia.
You also need to understand the kind of key marketing messages you want to relay. In Indonesia, it’s actually quite easy for you to get scammed when you sell used cars. Thus, we have put a lot of emphasis on marketing messages that have to do with how we are a safer channel when it comes to trading your car. In Malaysia, because the market is more advanced, usually you don’t get scammed as much. Therefore, we communicate to consumers more about the convenience of our services.
Kr: You said that Singapore has not been the priority for Carsome. We also have to mention your two competitors. Carro raised USD 90 million in Series B investment in August and acquired Indonesia’s Jualo.com as well as car bidding platform myTukar in Malaysia. Carousell also has a classified marketplace for buying and selling cars. What do you have planned for the Singapore market?
EC: The focus has been pretty much on Indonesia and Thailand because these two are the biggest markets, not so much Singapore because the size of the market is only about 100,000 used car units per year. When it comes to selling a car, I believe that the pain points exist almost everywhere in the world, whether you are in Malaysia or Singapore or elsewhere in the region.
When you want to sell a car, there’s really no proper channel to sell in a very efficient manner. The kind of proposition that we bring to the market is that we help you sell with full transparency. We take care of logistics, ownership transfer and payment, and you can even get bidding offers nationwide. Classified sites can advertise, but they can’t take care of the process of transferring or selling the car.
Carousell is in fact collaborating with us right now in Malaysia [through classified site Mudah] — and potentially in more countries. This means that we offer our auction services to their users. We want to see how we can complement their platform. We’re more of a transactional environment, and Carousell is part of the discovery phase. Our focus is really to do meaningful work in big countries like Indonesia, Thailand, and Malaysia.
Kr: Many Southeast Asian cities are congested. Balancing car ownership and other mobility solutions is a delicate matter. Do you think the used car market will continue to thrive or that regulators will have to be more cautious about it?
EC: I don’t see that as a reason for the used car market to decline. Car ownership is here to stay. Mobility solutions are also here to stay. The road infrastructure in many of the countries that we are in right now would still require you to have a car to travel conveniently. I don’t think we will see a decline in the used car market.
We are very open to collaborating with industry leaders and even startups offering mobility solutions, as long as such collaboration can complete our vision.
The interview has been edited for clarify and length.