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Carsome raises $19m as Southeast Asia’s used-car market revs up

Carsome raises $19m as Southeast Asia’s used-car market revs up

Carsome raises $19m as Southeast Asia’s used-car market revs up
March 10
12:40 2018
Eric Cheng of Carsome

Carsome co-founder and CEO Eric Cheng / Photo credit: Carsome

Malaysia’s Carsome has raised one of the country’s largest-ever series B rounds, securing US$19 million to strengthen its position in Southeast Asia’s ultra-competitive market for used vehicles.

Burda Principal Investments – the VC arm of German media company Hubert Burda Media – led the round. Existing Carsome investors Gobi Partners, InnoVen Capital, and Lumia Capital followed on.

This follows a US$6 million Gobi-led investment in June last year, and a US$2 million series A round in March 2016 backed by 500 Startups, Malaysian private equity firm IdeaRiverRun, and Japan’s IMJ Investment Partners.

Carsome co-founder and CEO Eric Cheng told Tech in Asia that the new funds would be deployed to hire new talent and expand regionally, with a focus on Indonesia and Thailand.

Tech in Asia data suggests this is Malaysia’s second-largest series B fundraise to date, behind the US$45 million raised by content streaming service iFlix in March 2016.


Launched in February 2015, Carsome started as a price comparison site for new cars. Following an injection of US$350,000 in seed funding the following August, the Kuala Lumpur-based startup shifted direction to tap demand from buyers and sellers of second-hand vehicles.

It established a “consumer-to-business” (C2B) platform that allows car owners to sell their vehicles to dealers online, with the possibility of getting the whole process – including legal transfer of ownership and payment – completed within one day.

Vendors can use the platform to check car valuation data, allowing them to set a realistic price and get the best deal they can. Dealers then make offers on listed vehicles through a bidding system.

Carsome also has its own team of vehicle inspectors that appraise second-hand cars before they are advertised on its platform.

We are on track to hit break-even point by early 2019.

The market appears to have responded positively to Carsome’s approach to trading used vehicles.

The startup said in a press release that its monthly total transaction value has increased more than fourfold since the start of 2017, with total car sales through its platform quadrupling over the same period.

“We are on track to hit break-even point by early 2019,” Cheng said when asked about the startup’s route to profitability.

A growing opportunity

Southeast Asia’s population of prospective car buyers is growing rapidly. BMI Research estimated that vehicle sales in the region outpaced the rest of the world last year. Total new vehicle sales in the Association of Southeast Asian Nations (ASEAN) were expected to increase 8.1 percent in 2017, up from the 3.1 percent growth the bloc experienced in 2016 and more than double the growth rate of 3.7 percent BMI projected for Asia as a whole in 2017.

The study identified Cambodia, the Philippines, and Vietnam to be the three fastest-growing markets. Sales of new cars in Indonesia, Malaysia, Singapore, Thailand, Vietnam, and the Philippines grew by a combined 14 percent between Q1 2016 and Q1 2017.

While this data relates to brand new cars, Cheng thinks that it is indicative of the potential in the used-car market too. The key task for platforms like Carsome is to give people trust and confidence in second-hand vehicles, he said.

Ninety percent of used cars now do not carry a warranty, and that lowers consumer’s confidence.

“GDP per capita [in Southeast Asia] is achieving new heights every year. Car ownership is also on the rise, which will attract more interest in buying a used car. But quality of used cars is crucial to improve consumer confidence, and Carsome is planning to implement financing and warranties solutions to tackle this issue.”

Cheng said that Carsome will gradually introduce new car financing and warranties solutions on its platform this year.

Financing will initially be targeted at dealers before being extended to end consumers, while Carsome’s forthcoming warranty program is based on its own vehicle inspection standards, he explained.

“Ninety percent of used cars now do not carry a warranty, and that lowers consumer’s confidence in the quality of used cars. This program would help instil confidence among buyers while revitalizing used-car dealerships’ image in the market.”

Diversification could prove vital as Carsome faces off against a number of other well-funded rivals, all keen to cash-in on Southeast Asia’s growing appetite for automobiles.

Crowded field

Cheng argued that Carsome’s C2B model – covering valuation, inspection, ownership transfer, and payment – helps set it apart from a crowd of competitors that includes C2C sites such as Caramo and Carro, as well as B2C portals that link dealers with prospective buyers, such as Carousell Motors and online auction houses.

However, it is not the only player aiming to become a one-stop shop for Southeast Asia’s auto traders.

In January, used-car marketplace BeliMobilGue – a Jakarta-based joint venture of Indonesian VC firm Intudo Ventures and Germany’s Frontier Car Group – secured US$3.7 million in a pre-series A fundraise led by Intudo. It plans to use the capital to expand country-wide and into neighboring markets.

A BeliMobilGue spokesperson told Tech in Asia that its unique selling point is the amount of pricing data it is able to work with.

The startup collects and analyzes this data, allowing it to perform rapid valuation and inspection of used vehicles submitted to it for potential sale. It then uploads the inspection report onto its mobile app, through which private buyers can bid on the vehicle. If the seller accepts an offer, BeliMobilGue receives a share of the money paid by the buyer, and stores the car at a distribution center until it can be collected.

Other companies in the space have opted for leaner, online-only marketplace or classifieds models.

Malaysia-based iCar Asia operates a network of auto sales portals in its home country plus Indonesia and Thailand.

Carmudi – a global group of automotive classifieds ads sites launched by Rocket Internet – raised US$10 million in January to grow its listings and enhance its technology offering. The round was co-led by HV Holtzbrinck Ventures, Tengelmann Ventures, and Rocket’s regional venture builder, Asia Pacific Internet Group (APACIG).

See: Rocket Internet quashes Asia exit talk amid reported Zen Rooms sale bid

Despite the massive opportunity suggested by the BMI research, the market has sometimes proven particularly tough to crack.

The Carmudi brand is present in several Asia-Pacific countries, but has fared worse in some compared to others. Last November it emerged that Rocket sold Carmudi’s Vietnam business to Swedish venture builder Fram in a US$50,000 cash-only deal.

Fram said that Carmudi Vietnam made US$169,000 in revenue with a loss of US$518,000 in FY 2016, but told Tech in Asia at the time that it aimed to operate the business at around a quarter of previous running costs, “without much, or any, negative impact on the revenues.”

This is a developing story. Check back for updates.

This post Carsome raises $19m as Southeast Asia’s used-car market revs up appeared first on Tech in Asia.

source : techinasia

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