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Carsome, Southeast Asia's largest integrated car e-commerce platform

Emelia Tan
Emelia Tan • 9 min read
Carsome, Southeast Asia's largest integrated car e-commerce platform
Carsome’s group CEO Eric Cheng has built up the region’s largest integrated car e-commerce platform
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Carsome, established in 2015, is Southeast Asia’s largest car e-commerce platform, operating in Malaysia, Indonesia, Thailand and Singapore. They offer end-to-end solutions for consumers and used car dealers, including inspection, ownership transfer, financing, and after-sales services. Led by group CEO Eric Cheng, Carsome prioritises trust, transparency, and choice for its customers as a non-listed company.

1. Beyond its role as a used car buying and selling platform, what other features does the Carsome service offer?

Carsome transformed the traditionally fragmented and tedious used car industry by addressing customer pain points. Their integrated, end-to-end ownership ecosystem covers the following areas:

• Automotive businesses: Carsome, a digitalised car-buying and wholesale business; Carsome Certified, a regional retail line offering refurbished cars; CarTimes, an independent car dealer in Singapore; LCT (Europcar), a car rental franchise of a global rental company in Malaysia and Thailand and Carsentro, a used car dealership in Indonesia.

• Automotive content: iCar, Southeast Asia’s largest online auto classified and advertising platform; WapCar, the regional auto content and social media operator. In Thailand, our brands include Autofun, Autospinn and In Indonesia, our brands include Autofun, Mobil123, and Carmudi.

• Ancillary services: Carsome Capital, a financial solutions and insurance service for customers and dealers in our markets; Carsome Service Centre (CSC), an after-sales services such as car maintenance

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• Automotive education: Carsome Academy, an emerging Technical and Vocational Education and Training (TVET) education institution accredited in Malaysia, Indonesia and Thailand, addresses the skills gap in the automotive industry and further supports the talent needs of Carsome Certified Lab and CSCs.

2. Has Carsome achieved any key highlights and milestones in recent months?

• Satisfied customers: As of 1Q2023, our retail line Carsome Certified holds a high net promoter score (NPS) of 77 points within the used car industry, while the Group’s wholesale business garnered an NPS of 75 points.

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• Rollout of MyGarage: The incorporation of MyGarage into the group’s Carsome App in June further elevates the car ownership experience by providing comprehensive features from real-time car valuations to service bookings and ancillary services.

• Solid growth in ancillary services: CSCs have seen more than 100% m-o-m growth since their launch at the end of last year and are expected to reach nationwide coverage in Malaysia by the end of 3Q2023. Last year, Carsome Capital was awarded a digital banking license and registered US$100 million ($132 million) in incremental sales.

• Impactful digital footprint: We have one of the largest auto digital audience footprints of more than 15 million monthly active users across the network, driving down customer acquisition costs.

• Strong investor support: We concluded a financing round in June, further strengthening our liquidity to US$200 million.

3. How cost-efficient is Carsome’s operations? How are you improving cost management?

In 3Q2022, Carsome pivoted from a growth-oriented strategy towards an accelerated profitability plan driven by three key priorities:

• Increasing trade margins: Focusing on high-quality transactions was crucial in realising an almost doubled trade margin in 2022 compared to 2021. In 1Q2023, the group also achieved record high-margin performance.

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• Improving operational efficiency: Streamlining processes and reducing overheads led to significant improvements in productivity and contributed to operational profitability in 1Q2023. The group also leveraged data and technology to refine its systems and processes, yielding significant efficiency gains.

• Driving synergies from acquired businesses: Strategic acquisitions such as iCar Asia Group delivered impressive y-o-y revenue growth and significantly contributed to a reduction in customer acquisition costs of over 60% in the past year.

4. What sets Carsome apart from conventional dealers, and what problems does it aim to solve?

We offer a trusted digitalised experience for buying and selling cars, addressing customer pain points. Our app provides digitally accessible ancillary services like insurance, financing, and after-sales support.

Our Carsome Certified retail line also ensures quality-assured cars through regional Carsome Certified Labs offering comprehensive refurbishment services. We are one of the largest used car supply aggregators, where 90% of cars are sourced directly from customers, transacting approximately 150,000 cars in 2022 and generating US$1.5 billion in revenue.

We also have a vast hub and logistics network, including over 120 physical locations, three Carsome Labs and more than 20,000 dealers. Today, we deliver the world’s first integrated car ownership ecosystem, offering more than buying and selling used cars. Our services encompass ancillary and other conveniences, providing peace of mind throughout the ownership experience.

5. How do iCar Asia and CarTimes acquisitions bolster Carsome’s industry position, and what is Carsome’s M&A strategy?

Our multi-brand strategy has expanded our reach in the content and classifieds space, with iCar Asia and CarTimes playing vital roles in initiating customers’ car ownership journey. These brands generate leads that enhance our data engine for Carsome’s go-to-market strategy. Regarding M&A, our focus is on fulfilling customer needs and bridging gaps in the value chain. We evaluate potential candidates for their value-add to our ecosystem before reaching agreements.

6. What business synergies exist between Carsome Certified Labs and Carsome Academy?

Recognising that Carsome can only grow as fast and efficiently as our staff’s capabilities, Carsome Academy was established to proactively uplift our talent pool by providing upskilling and reskilling opportunities for graduates, technical workers, and early school dropouts. Carsome Academy is essential in ensuring the high quality of Carsome Certified Labs’ workforce, as the value of our business lies in our highly-skilled technicians responsible for quality-assured cars.

7. As part of the consortium awarded a digital bank license in Malaysia, what are Carsome’s plans moving forward?

Being part of the consortium will complement the efforts to expand our offerings and services. Leveraging on our financing capabilities (via Carsome Capital) and now with the digital bank license, we hope to provide a greater value proposition in auto-financing to further elevate the car-buying experience for Malaysians, especially for the unserved and underserved communities.

Our mission is to simplify car ownership journeys in Southeast Asia, which cannot be done without the support of a vast database. Having the opportunity to tap into the digital banking front allows us to access the car market from different perspectives, such as pricing car values, identifying the ideal car models and loaning time frames depending on customers’ credit profiles, which is key to building an ecosystem with more transparency and efficiency.

8. What market opportunities is Carsome currently leveraging to strengthen its business?

We are capitalising on economic growth and rising car ownership. With continued economic growth, a rising upper middle class, and a projected increase in car ownership across Southeast Asia, we are well-positioned to capitalise on the comprehensive ecosystem it has built. Southeast Asia’s used car market is fragmented and unorganised, providing an attractive opportunity for disruption.

Given the nascency of the used car e-commerce industry in the region, it also presents a more attractive market opportunity and cost structure. As a market leader, we are strategically positioned to capitalise on these opportunities and create a more organised and efficient marketplace.

Over the past few years, we have focused on delivering a complete car ownership ecosystem, building on retail and wholesale segments to cater to dealers and customers alike.

The recent launch of CSC expands our offerings into maintenance and repair services, providing more comprehensive solutions for car owners. We are also future-proofing to meet electric vehicle (EV) demand — we are developing EV distribution and servicing capabilities and are prepared to serve EV manufacturers looking to penetrate Southeast Asia.

9. Outline the material environmental, social, and corporate governance (ESG) factors for Carsome and how they will generate long-term stakeholder value.

Carsome Group:

• Job generation for locals: We have an over 4,000 strong workforce from all backgrounds, regardless of age, gender and race.

• Embracing diversity and inclusion: We promote diversified and inclusive growth and champion movements like Women In Tech. Approximately 26% of the over 150 senior leaders in Carsome are women. In addition, our team of 2,999 employees from over 20 nationalities as of Dec 31, 2021, has grown to over 4000 employees, with over 33 nationalities.

• Circular economy: We created a platform for continued value creation on cars throughout their usable lifetime.

• Supporting the standard of living: We enhance economic opportunities by providing used cars at competitive pricing, contributing to greater accessibility and social mobility. Stewardship: Our strong governance structure via a reputable Board of Directors (BOD) and Advisory BOD members who come from diversified backgrounds.

• Investors: We are backed by a respectable list of strategic and institutional investors that continue to support our growth.

Carsome Capital:

• Serving the underserved and unserved: Ancillaries such as insurance and financing products serve those who previously may not have been able to access these products and services.

Carsome Academy:

• Upskilling: Equipping local graduates, low-income groups, early school dropouts, and indigenous backgrounds with accessible programmes relevant to industry needs, leading to real income generation.

• Income generation and bright career path: Generate a fulfilling and lucrative career path with a starting salary of RM2,000 ($581.71), moving upwards to high thousands as they progress in their careers, made possible through the Academy’s program structure, including technical and managerial skill development.

• Elevate the TVET ecosystem: The first-of-its-kind soft skills curriculum for an Automotive TVET institution developed in collaboration with Sunway University.

10. What is Carsome’s value proposition for potential investors in the used-car industry?

Fuelled by our ecosystem strategy as well as tech and data capabilities, combined with the macro tailwinds driving digitalisation across Southeast Asia, we believe that our value creation capabilities are as follows:

• Strong growth momentum: In 2022, the group’s revenue grew over 2.5 times to US$1.5 billion, with the newly established regional retail line Carsome Certified contributing 35% of total revenue. In 1Q2023, we hit an operational profitability milestone for the first time thanks to significant growth in trade margin that doubles y-o-y. More than 80% of the trade margin came from transaction margins, leaving a huge potential upside for ancillary revenue given its increasing focus on ecosystem offerings, including financing, insurance and aftersales.

• Vast market opportunities: Southeast Asia’s used car e-commerce market and car ancillary market are set to grow by 35.2% and 10%, respectively, between 2023 and 2025, and we believe that we are well-positioned to capitalise on these trends.

• Large untapped market: Using our data and tech-enabled ecosystem strategy, we are primed to leverage Southeast Asia’s estimated US$270 billion market opportunity, offering significant value creation potential.

Emelia Tan is a research analyst with the Singapore Exchange

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