Carsome, a used car marketplace based in Malaysia, plans to enter more markets in Southeast Asia after raising US$6 million in a new round led by Gobi Partners. Other investors include Lumia Capital, Innoven, and existing investors 500 Startups and Spiral Ventures.
Carsome has its own inspectors that appraise users’ second-hand cars, which are then added to the platform. After that, over 1,500 car dealers can make offers on the vehicles through a bidding system. Sellers can sit back and wait for the best bid to come in rather than visiting standalone shops one by one.
The company will use the fresh funds to expand into new markets and set up more inspection outlets across the four countries where it already has a presence: Malaysia, Singapore, Thailand, and Indonesia. With the exception of Singapore, the countries are the largest car markets in the region, with a total of 3.5 million used car transactions annually, claims Carsome. Across Southeast Asia, the transactions number 4.5 million, with the used car industry raking in US$30 billion in sales per year, chief executive officer Eric Cheng tells Tech in Asia.
Cheng declines to disclose the new funding stage. Carsome last year raised US$2 million in series A funding from Malaysian private equity firm IdeaRiverRun, 500 Startups, and Japan’s IMJ Investment Partners. Since then, it says its monthly revenue has grown by 12.5 times while its annualized gross revenue has reached approximately US$30 million.
Carsome’s choice of investors for this round stems from a decision to work with people who carry extensive knowledge of the industry. Both Gobi Partners and Lumia Capital back used car trading platforms – Chezhibao in China, which recently just raised US$100 million, and Instacarro in Brazil, respectively.
Focus on car dealers
“The C2B model that Carsome emphasizes on makes a lot of sense especially in emerging markets like Southeast Asia because there is not enough data that enables trust between sellers and buyers. Carsome provides a de-risking element for both sides – the sellers who are generally individuals and buyers who are dealers,” says Victor Chua, Gobi Partners vice president of investment for ASEAN.
While other business models are on the cards, Cheng says the market sees them as an “Amazon for car dealers,” serving as dealers’ main channel for inventory sourcing.
“Using the Chinese market as a benchmark, the C2C model is only about 25 percent of the used car transactions. There is also limitation to C2C in terms of the condition and age of the vehicles. The C2B model solves the trust issue,” adds Chua.