Right time, right market
Consumers’ pivot to private vehicles and online purchases is a boost for Carsome
“We are ahead of our forecast for the year by about a quarter and growth is still accelerating.” Eric Cheng
MANY e-commerce platforms have noticeably thrived in the last one and a half years as businesses go online to reach their customers and consumers scour the Internet to get their purchases.
For Carsome, founded in 2015, the pandemic may have added another boon: a return to private vehicles.
Eric Cheng, co-founder and group chief executive officer of used car platform Carsome, notes that more people are opting for private cars compared to public transport and e-hailing services due to the heightened concern on public health and hygiene.
According to a consumer survey it carried out in its core markets, the company found that 79% of Malaysians, 74% of Indonesians and 55% of Thais were not comfortable sharing a car ride with strangers or using public transport.
“We also observed that consumers who are watching their spending and budget have a preference for used cars over new ones for their affordability and value for money,” he says.
Coupled with the rapid acceleration of digital adoption amid the Covid-19 pandemic, Carsome is indeed enjoying the perfect recipe for growth.
“Consumers are increasingly adopting an ‘online first, online only’ approach for purchases, even for a traditional industry like the used car industry. Before last year, it took more than 10 years for the retail digital penetration rate in South-east Asia to get to 3%. But it took less than one year for that to rise to 6%.
“Before this, we were already digitalising the used car industry as much as possible to consolidate a very fragmented market. And online used car selling platforms in Malaysia and Indonesia have gained a lot of popularity during and even after the lockdown period.
“These opportunities became the right timing for us to introduce the new way of buying cars by providing customers with a seamless online-to-offline experience in buying used cars, topped off with peace of mind and quality assurance,” says Cheng.
In the early days of the movement curbs, Carsome had pivoted its efforts to increase productivity and strengthen its technical skills as business activities were halted in the second quarter of 2020.
They fine-tuned and expanded their technology and products to increase productivity and convenience for its dealers and car inspectors, as well as upgraded its backend infrastructure.
Consequently, Cheng says Carsome was able to quickly capitalise on the situation and pent-up demand as restrictions were eased to achieve a V-shape recovery last July – just two months after it resumed business in May.
“We were able to navigate through these uncertain times and came out stronger, thanks also, in part, to the continuous support from our investors in the form of advice on managing the business in times of uncertainty, sharing vital information that influences
key business decisions and also bridging the connection with key industry partners,” he says.
Malaysia Venture Capital Management Bhd (MAVCAP) is an investor in Carsome via venture capital funds, namely, the Superseed Fund, 500 Durians, MAVCAP Gobi Fund 3, the Meranti Asean Growth Fund and Vynn Capital.
Last December also saw the company raising Us$30mil (Rm123.28mil) in its Series D round, which was considered one of the largest all-equity financings in South-east Asia’s online automotive industry.
The funds will be used to strengthen its existing consumer-to-business (C2B) used car e-commerce, accelerate its new offering in the business-to-consumer (B2C) segment and support any potential merger and acquisition opportunities.
Its significant performance last year has also put Carsome on a stronger base for an accelerated growth trajectory for the coming years. Reports note that the company has achieved operational profitability as of October 2020, excluding headquarter costs.
“We ended 2020 on a strong note and have, in Q1‘2021, registered another 50% growth in monthly revenue compared to December last year. We are ahead of our forecast for the year by about a quarter and growth is still accelerating,” he notes.
Carsome currently transacts an annualised 100,000 cars totalling Us$700mil (Rm2.88bil) in transacted value, making it the largest integrated car e-commerce platform in South-east Asia.
Even so, Cheng points out that this only represents close to 2% of the total market. As such, there are vast opportunities still for the group to grow in the existing markets they are in.
This year, Carsome is aiming for annual growth of three times, and Cheng says the platform is on track to surpass Us$1bil (Rm4.11bil) in transacted value as it continues to expand its footprint to more cities in
Malaysia, Indonesia and Thailand.
To get there, the company is looking to strengthen its existing regional leadership and enhance customer experience. It will also invest in deploying new solutions powered by big data and machine learning.
Cheng adds that the launch of its Carsome Certified programme in March has also set the path for its next chapter of exponential growth for retail sales.
And with consumer buying behaviour increasingly shifting towards online, Cheng is optimistic that the online used car industry will continue to see sustainable growth.
He points out that interest in online used car selling platforms increased by 55% in Malaysia, 34% in Indonesia and 19% in Thailand.
“Based on our observations in several key markets, including China, the sales of used cars continue to sustain post-lockdown. During times when personal hygiene and safety are highly valued, consumers are generally in favour of opting for private car ownership.
“We continue to be extremely focused on creating a significantly superior and differentiated consumer experience by enhancing the transparency and trust factors throughout the used car journey.
“We want our consumers to move forward with peace of mind, be it selling their cars in the fastest, most transparent and most convenient manner, or confidently buying a certified used car online. We do this by applying tech and data in our decision-making and product offerings,” he shares.
Data intelligence, he adds, will enable the platform to further learn about consumer demand in a detailed and dynamic manner. This will help the team gain a better understanding of its products and ensure constant improvement as well as better control over its supply chain in terms of inventory procurement and management.
“It also allows us to provide data-driven insights to determine the best possible price for consumers.”
With revenues doubling and growth prospects looking bright, Carsome had initially indicated its goal towards an initial public offering by the end of 2023 in the US.
Notably, there has been a recent flurry of technology companies that have sought listing opportunities in the US amidst strong sales boosted by the pandemic. One of the more significant ones is the upcoming listing of Grab via a merger with a US blank-check company.
Asked if Carsome may potentially bring its listing ambitions forward to leverage the special purpose acquisition company (SPAC) boom now, Cheng says: “We see strong business fundamentals and great market opportunity that supports an accelerated timeline. We are currently evaluating all our options to get there.”
Despite its growth into a regional company, Malaysia has remained as its base.
Cheng says the digital startup space in Malaysia is extremely vibrant and most of these initiatives are led by government-linked companies such as the Malaysia Digital Economy Corp (MDEC) and Malaysian Global Innovation & Creativity Centre (MAGIC).
“We are direct beneficiaries of these initiatives through the cultivation of a rich digital talent pool. We also appreciate the willingness of collaboration between both the public and private sectors in Malaysia.
“The participation and contribution to the discourse on ideation, co-innovation and commercialisation from our partners, be it local banks, corporations or startups have contributed greatly to Carsome’s growth.
“Malaysia also provides a world-class talent pool. Our pillar of strength has always been our people, and it is easy to get local and foreign experts of their respective fields to join us and build the Carsome brand,” he says.