Hi there. It’s Brady.
More than a decade and a half ago, when I was an undergraduate in the American South, where there was plenty of space and components were cheap, I bought old cars, fixed them up, raced them on a dragstrip, and sold them.
Stripping down an engine to its bareness, dismantling a car’s beating heart, and retooling its bits and pieces to squeeze out just a little extra dose of efficiency was a sweaty, greasy grind. But when the last bolt was tightened, and the twist of a key made a vehicle come to life, every blast timed exactly right—sometimes after years of mechanical dormancy—the rush of endorphins was hard to beat.
This is all to say used cars can be gems. There is an art to buying, restoring, selling, and caring for them.
In the past week, two Southeast Asian car marketplaces have been in the headlines. One, Carro, joined the three-comma club. Another, Carsome, is likely edging near that. Great things seem to be happening for both companies, so kudos to them. But I do wonder what is behind their hypertrophic climbs in valuation and what makes these two marketplaces hum like well-tuned engines. Khamila, one of my colleagues in Jakarta, wrote about this.
Part of the argument for the long-term viability of Carro, it seems, is that it doesn’t just facilitate the sales of cars, but also finances the transactions and offers insurance. Fair enough—buying a vehicle can be a process laden with paperwork stretching in multiple directions, and some consumers likely appreciate the ease of getting it all done in one place.
And for Carsome? High exposure to consumers via popular e-commerce portals.
Carsome’s CFO told KrASIA last year that she expects more customers to purchase used cars than new ones in 2021, in part because pandemic-related uncertainties will linger. At around the same time, Carro’s CFO told us that he expects the company’s revenue base to double or triple each year. Bold claims, both.
One thing to keep in mind is that these sites function much like a set of local listings rather than retail e-commerce portals. Someone who wants to buy a car in Kuala Lumpur is unlikely to flip through listings in Penang. The merchandise in question is matched with buyers within a limited distance from its point of sale.
There are plenty of pitfalls in this line of business, and one company in China shows us how quickly a car marketplace can collapse: Renrenche, once one of the hottest unicorns that operated in used car listings, reportedly carried a valuation of just USD 1,000 by October 2020.
In the meantime, Carro and Carsome are gearing up for a mean race.
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- Tiger Global and Sequoia India lead USD 25 million round in lending startup Progcap.
- Chinese tech companies are flocking to New York for IPOs after a two-month lull.