This article was originally published in Chinese on Momentum Works’s WeChat platform, translated into English by the Momentum Works team.
Last week, Malaysia-based used car platform, Carsome, announced that it had raised US$290 million in its Series-E round, taking the valuation of the company to US$1.7 billion. The round was led by three sovereign investors – Qatar Investment Authority and two Temasek-owned funds – 65 Equity Partners and Seatown Holdings.
When we published our Used Car Platforms in Southeast Asia report in May 2020, we felt that this market space needed to be seen. To be fair, we did not expect this industry to be on the radar of many investors so soon. Carsome, and its main competitor, Singapore-based Carro, have become unicorns one after another.
We are planning to launch the updated 2022 edition of the Used Car Platforms in Southeast Asia report in the first half of this year. However, ever since news of Carsome’s financing round came to light, many friends asked us questions about the used car industry in Southeast Asia. So we compiled all their questions and answered them.
How big is the used car marketplace in Southeast Asia?
The major regions in Southeast Asia for the used car marketplace are Indonesia, Malaysia and Thailand – which are also the main competitive markets for Carsome and Carro. We estimate that the overall used car market in these three countries was approximately US$43.2 billion in 2020. We also predict that this market size will increase to US$50.4 billion in 2025 if no black swan event happens between now and then.
Although the overall market growth rate is not very fast, considering that the current combined market share of the major platforms does not exceed 5%, there is still a lot of room for these platforms to grow.
Who is stronger – Carro or Carsome?
According to our research, the market with the largest business volume and the highest penetration rate is Malaysia, for both Carsome and Carro. In Malaysia, Carsome is now four times the size of MyThukar, the Malaysian player earlier acquired by Carro.
Carsome is also slightly ahead of Carro in terms of sales volume in Thailand and Indonesia. However, the overall volume of these two platforms in these countries is very small, so the market share there does not mean much.
Why are the two valuations growing so fast? Didn’t Guazi fail?
In the used car industry, pure traffic-based platforms are in a tough spot and most could not break through their growth bottleneck. This is similar to the case of real estate. At present, Carsome is still doing a lot of ‘heavy’ work – self-operated refurbishment, repair plants and offline retail stores.
As for the valuation, the listing of Carvana in the United States greatly boosted the valuation (and investor attention) of used car platforms globally. It has also attracted many investors who did not previously pay attention to this industry. In addition, there is Mexican used car platform Kavak’s soaring valuation as a benchmark:
Will there be new entrants
Indian player Cars24 recently announced that they would enter Southeast Asia, mainly focusing on developing markets of Thailand and Indonesia.
Although the involution in India’s local market has contributed many good founders and investors to Southeast Asia, the performance of Indian internet companies coming to Southeast Asia is generally unimpressive – Zomato, Practo, Meesho, etc. They have been more opportunistic than committed to the market. This is similar to the problems encountered by many Chinese internet companies coming to Southeast Asia.
Before the pandemic, another Indian company, CarDekho, was coming to Southeast Asia. It acquired the Philippine operations of Carmudi, a car classification platform under Rocket Internet.
Another interesting fact is that, like Carro, Cars24 is also invested in by SoftBank.
What Chinese elements do Carsome and Carro have?
Both of them, directly and indirectly, have investors from China. At the core executive level, Carro is mainly Singaporean while Carsome’s group CFO and the CEO of the retail business are originally from China; there is also a product and technology team in China.
When will the two companies be listed?
They should be preparing for a public listing. Their future valuation depends not only on Malaysia’s retail business but also on whether they can crack the market of Indonesia and Thailand. The offline used car industry in both countries is difficult for outsiders (or anyone trying to get it organised). Indonesia might be slightly easier – after all, the market capacity is large enough, and the Malaysian executives have no language barriers entering Indonesia.
At present, the business volume for the two companies in Indonesia is larger than that in Thailand. After becoming unicorns, both companies should find it easier to attract Thai management and operation talents.