Amidst the madness of 2021’s funding craze, it can be easy for trends to get lost in a crowd. One such one is that of used car marketplaces.
This trend has been seen across regions. In India, Cars24 and CarDekho continue to attract investor attention.
Similarly in Southeast Asia, the last quarter has seen the rise of two unicorns – Carro and Carsome.
So what is it, about this space, that has led to the minting of these two unicorns?
The Rise of the Second Hand Economy
The comparison of used vehicle ownership to population ratios across geographies shows that SEA is one of the most underpenetrated regions.
The US, on average, is 3x higher than most Southeast Asian countries. This is due to economical, but mostly cultural factors. Southeast Asia is made of mostly dense cities where car prices are relatively expensive and unaffordable.
As a result, public transport is far more the norm. However, given first-hand vehicles are expensive, the emergence of the used car segment was natural.
Traditionally this segment was dominated by offline brokers, traders and direct sellers. Although successful to a certain extent, there were some glaring deficiencies. These mainly pertained to price discovery, transparency around quality, inventory management amongst others.
Due to these deterrents, used vehicle adoption rates remained low despite latent demand.
Enter the new-age online marketplaces such as Carro and Carsome. Seeing the obvious pain points faced by buyers, these players offered end-to-end services and treatment that buyers would get from new car dealers.
These players effectively streamlined the process of buying second-hand vehicles and attracted new users.
These players effectively expanded the overall pie, resulting in a US$55 billion market.
COVID proves to be an expressway for these players
The pandemic further proved to be a catalyst for the sector in more than one way.
On one hand, automobile players were faced with multiple supply chain issues. As a result, the waiting time to own new vehicles increased.
Moreover, the alternative, public transport did not fare much better. In the time of COVID-19, travelling in a packed bus or train with dozens of strangers was not considered safe or reliable.
The answer: used cars.
According to a report by Mordor Intelligence last year, sales of used vehicles in Southeast Asia were 30% higher than new vehicles, something which has never happened before.
The demand was clearly there. So who were the players benefitting?
Marketplaces shift into high gear
Carsome, and Carro have both achieved unicorn status over the last 12 months and are leading the pack.
Carsome, Malaysia based company, was established in 2015 as a vehicle comparison site. Since then, it has transformed itself into a pre-owned car trading platform with operations in Malaysia, Indonesia, Thailand and Singapore.
It has recently partnered with Catcha Group to acquire Australia listed iCar Asia, a listing site. The result? The largest Malaysia based unicorn.
Carro is Singapore based and founded the same year as Carsome. 70% of the transactions on its platform are taking place outside Singapore, a testament to its regional presence.
Apart from harnessing the capabilities of AI, it has recently added fintech services such as car loans and insurance to capture higher wallet share. The path it seems to be treading on is one to be a one-stop-shop for consumer needs.
Although not exclusively a used car marketplace, Carousell also has a presence in this space. It was founded in 2012 and operates as an online classifieds marketplace for used consumer goods, giving a second life to pre-owned items. It added automobiles on its platform in 2017 and has noted significant traction on this segment.
BeliMobilGue (BMG), Carmudi are few other players operating in this segment that have also noted growth during the pandemic.
The Road Ahead
Despite explosive growth over the past two years, the overall used car market still has huge untapped potential. Experts unanimously acknowledge that the sector has firmly entrenched itself in Southeast Asia.
More importantly, players such as Carro and Carsome have brought a change in consumer mindset on how they perceive second-hand vehicles.
The work they have done indicates that there is still an interesting path ahead for these marketplaces in Southeast Asia.
Writing: Armaan, Ajeet Design: Abhinav