"A few years ago, we found that there was no centralized or systematic platform in the used car market," said Eric Cheng, co-founder and group CEO of the online used car platform Carsome.
"Instead, it was fragmented due to a lack of transparency and compromised by distrust of used car dealers."
To be honest, the used car industry has seen tremendous challenges in creating integrity, credibility, and authenticity. The public perception of used car dealers has not been very favorable for a long time.
In fact, a European Commission study found that the used car market has the lowest total score among commodity markets – this was also the case in 2010 and 2011 in the European Union.
The market is affected by asymmetrical information, which explains the particularly low trust values. It also had the worst performance of all commodity markets in terms of consumer issues and comparability.
Establishment of a transparent buying and selling process
This caused Eric to find Carsome together with the partner and now Chief Business Development Officer Teoh Jiun Ee, who started operations in Malaysia in 2015.
Eric shared more about himself and said he was an accounting student, but decided to finish his studies in his second year because he always had an entrepreneurial streak.
Eric Cheng, co-founder and CEO of Carsome, with Jiun Ee Teoh, co-founder and chief business development officer / Image Credit: Carsome
He founded an advertising network and creative agency, which he eventually sold after nine months.
He then used his eight years of experience in digital advertising, which strengthened his understanding of the market requirements for the kick start of Carsome.
I noticed the weaknesses in the used car industry – the lack of transparency, the complicated and fussy process, etc. and thought, "Why not come up with something to fix the problem?"
– Eric Cheng, co-founder and Group CEO of Carsome
Carsome started out as a business solution to help people buy a car. After all, the business focused on helping people sell cars.
"We take care of the entire car sales process, from car inspection to transfer of ownership to fast payment, and offer our customers an easy and hassle-free process," added the 35-year-old in an interview with Vulcan Post.
Photo credit: Carsome
The C2B platform connects sellers (consumers) with buyers (used car dealers) and promises used car owners that they can sell their used cars within just three days.
It only takes two minutes for users to submit their data. Then they will be contacted to plan their car for bidding. You will then receive bids from your dealer network in the next three hours.
You can then send your car for inspection – another 45 minutes – to the highest bidder. It takes another hour to negotiate the final offer, and the transaction can be sealed almost immediately.
Overall, this entire process can be completed within six hours.
Overseas inspection center / Photo credit: Carsome
Overseas inspection center / Photo credit: Carsome
By 2016, they had launched Carsome Singapore and exceeded the 1,000-car mark that was handled annually.
While there are Carsome inspection centers at different locations in Malaysia, car inspection in Singapore is carried out wherever the highest bidder is comfortable. This means that you can choose wherever you want to trade.
In Malaysia and Singapore, they were doing so well that they expanded to Indonesia and Thailand in 2017.
In 2018, Carsome surpassed the 10,000 car annually markup and was named “Startup of the Year” by the Malaysian Rice Bowl Startup Awards.
According to Carsome, they are now the largest used car trading platform in the region.
Change in customer perception of SEA's used car market
Although they had brought the business into high gear in their early days and expanded the team in Southeast Asia (SEA) to the current size of 800, their biggest challenge was to convince the market that (their) platform could be trusted, said Eric.
Getting sellers and dealers to use the new product on the market at the time and trust it was no easy task, especially since they were the first pacemakers.
It took a lot of time to build confidence that our inspection standards and reports are standard and reliable enough to make business decisions for dealers.
– Eric Cheng, co-founder and Group CEO of Carsome
In an online study by market research company Vase.ai in September 2018, only 21 percent of consumers in Klang Valley, Malaysia knew about the Carsome brand, while only nine percent were willing to try their services.
Carsome realized that one of the main obstacles was the confidence factor of used car dealers.
Photo credit: Property Portal Watch
In addition, consumers were not aware of Carsome's services and benefits, and the differences between Carsome and other car sales services such as Carlist and Mudah.
There were also consumer issues and concerns that Carsome needed to know and understand when consumers sell or trade their vehicles.
With the results of the study, Carsome has refined its ads with relevant news that focuses more on consumer concerns, canceled certain ads and invested more in others.
Waiting lounge / Photo credit: Carsome
As a result, they saw significant improvements and transaction numbers as one group grew tremendously year-on-year (YOY), while the GMV group (gross goods value) also saw significant year-on-year growth.
"Consumers and dealers are becoming more receptive to used car trading platforms like us. We believe this will continue as a trend and subsequently as a norm in Southeast Asia," said Eric.
Around 40,000 cars are processed in the Carsome app every year – this corresponds to a transaction of about one every 10 minutes.
Current funding of $ 85 million
In December 2019, Carsome raised a Series C financing round of $ 50 million (S $ 68 million), the largest ever.
Investors include MUFG Innovation Partners, Convergence Ventures, Ondine Capital, Endeavor Catalyst, Gobi Partners and Daiwa Pl Partners.
They will pump the $ 50 million raised by strategic investors into the SEA markets to significantly expand their presence.
They also intend to expand their range of products and existing services, including insurance, the compilation of financial products and a significantly different experience when buying used cars.
Eric also said he wants to consolidate Carsome's number 1 position in the region while expanding beyond Southeast Asia.
Eric Cheng in the middle / Photo credit: Techcrunch
Last year they had two rounds of funding – a Series B1 round of $ 19 million and a Series B2 of $ 8 million.
In six financing rounds from 2015 to 2020, they raised $ 85 million and want to expand their presence in existing markets.
SEA's used car market is worth more than $ 40 billion
According to a report by venture capitalist Momentum Works, 6 million used cars were sold in 2019, and the industry is dominated by players such as Belimobilgue, Cardekho, Carmudi, Carro, Carsome, iCarAsia, OLX and SGCarmart.
In the Southeast Asian market, Indonesia, Thailand and Malaysia are the most frequently used auto transactions.
Despite our previous transaction value of $ 600 million, we have only penetrated one percent of the Southeast Asian used car market.
– Eric Cheng, co-founder and Group CEO of Carsome
The used car industry is an undersupplied market in Southeast Asia with high growth potential.
Emerging markets from Southeast Asia offer better car ownership potential compared to industrialized countries. Indonesia, Thailand and Malaysia are good examples of consistently high historical growth in used car sales and future potential due to the currently lower base.
Photo credit: Momentum Works
According to research collected by Momentum Works, the number of units sold per capita in Malaysia is the highest in the region, although it is behind Indonesia and Thailand in absolute terms. The highly liquid market offers Carsome a good home.
In Malaysia, Indonesia and Thailand, the used car industry has a market size of more than $ 40 billion in 2019 and is the three largest markets in Southeast Asia. Our business focus is of course to go where opportunities are and to consolidate the market as much as possible.
For 2020 we will focus on horizontal and vertical growth where we currently operate – Malaysia, Indonesia, Thailand and Singapore. We will continue to expand into more cities in these countries to expand our network and help more people sell their cars.
– Eric Cheng, co-founder and Group CEO of Carsome
Singapore ranks 6th behind the Philippines and Vietnam. Singapore is lucrative in the average auto transaction value, but limited in market size. The growth is further slowed down by the government's zero-auto growth policy.
Second-hand car market not affected by Covid-19
Typically less volatile compared to new car sales, used car sales are expected to remain stable and less affected by the Covid 19 pandemic.
Carsome has almost completely recovered to the record high transaction volume before the block: used car transactions were 300 percent higher in June 2020 than in May 2020 and over 70 percent higher than in June 2019.
The Carsome Consumer Survey, conducted in April 2020, shows an expected 76 percent drop in ridesharing among consumers as they felt safer with their own vehicles.
Eric Cheng / Photo Credit: Carsome
Given the pandemic situation, consumers continue to avoid public transportation and carpooling and are turning to private car ownership.
According to the survey, 34 percent of Malaysians, 43 percent of Indonesians, and 25 percent of Thai people plan to sell their cars within the next 12 months, with most giving reasons for getting rid of their old cars or wanting more cash on the bar Hand.
In addition, the introduction of new tax rates in Malaysia, Indonesia and Thailand has contributed to strong consumer demand for new and used cars.
This has led to an increase in inspections at all Carsome centers, with car sales increasing significantly.
Carsome also saw a more robust demand from its used car dealers as they replenished their inventory to meet pent-up demand.
As a result, they partnered with CIMB Bank in 2020 to launch a digital financing solution for merchants and PT Bank Danamon Indonesia for cash management solutions.
On the supply chain capability side, they are working to get accreditation in their auto inspection standards.
Like SEA's used car market Would look after 2020
The performance of the used car market is generally influenced by that of the new car market and is an indication of the demand for private cars.
Recent events indicate that the used car market is generally performing particularly well given the recession, Eric said.
Eric Cheng / Photo Credit: Carsome
This is also evident across the industry, with the recovery trend for cars under RM 30,000 (S $ 9,800) following the Movement Control Order (MCO) in Malaysia showing a stronger upswing.
Car ownership in SEA is increasing, which is turning into much more room for growth in the used car industry.
To make a difference in this market and be a real disruptor, the key is always trust – the confidence of the mass market that they can sell their cars at a fair price, with ease and speed, and the trust of dealers that The source of the used car is of good quality and corresponds exactly to the pictures in the inspection report.
"We firmly believe that Carsome has addressed all of the key points in delivering a truly breakthrough product to revolutionize the used car market," said Eric.
Selected image source: Carsome
