Booming sales of used cars in south-east Asia and India are fuelling a burst of fundraising by online platforms seizing the pandemic-driven opportunity to sell to the region’s growing middle class.
A pick-up in consumer appetite for making bigger-ticket purchases online has helped create India’s newest unicorn, a used car platform, while in south-east Asia these companies are raising fresh capital and plotting US listings.
The change in attitude mirrors a global trend. In the US, share prices of online used-car dealers have surged, with New York-listed Carvana rising more than 180 per cent this year. The valuation of privately held Cazoo, a UK-based start-up, has doubled to $2.5bn.
The $321m raised across south-east Asia and India this year by online players selling used cars is comparatively small but a bright spot in a patchy fundraising environment during the public health crisis.
Overall fundraising by start-ups dropped nearly 30 per cent in India in the first half of 2020 compared with 2019, to $4.2bn, according to Tracxn, a data provider. In south-east Asia over the same period it fell 18 per cent to $6.3bn, according to data from Google, Temasek and Bain & Co.
Car sales per capita in south and south-east Asia are low, helping fuel the rise of ride-hailing companies such as Gojek and Grab, south-east Asia’s biggest start-ups, and Ola, which competes with Uber across India.
The number of cars in circulation equates to 22 per 1,000 people in India and 86 in south-east Asia, according to data from Momentum Works, a research firm. That compares to 138 in China, 480 in Japan and 618 in the US.
“Markets in south-east Asia have one of the lowest vehicle ownerships in the world which also previously paved the way for ride-sharing platforms taking off,” said Oliver Rippel, co-founder of private equity firm Asia Partners and a former executive at Naspers, the South African internet giant.
Now, with ride-hailing and public transport being abandoned as unsafe across the coronavirus-ravaged region, people are snapping up used cars.
Monthly sales on Carsome, a Malaysia-based used car platform that also has operations in Indonesia, Singapore and Thailand, have jumped to 6,000 cars, from 2,000 to 3,000 pre-Covid. The company this week raised $30m from investors including Asia Partners, and is planning an initial public offering in the US as soon as 2022.
“The pandemic has definitely accelerated our business. We expect to be profitable across the group next year,” said Eric Cheng, Carsome chief executive. “Then we want to list on a major exchange like the Nasdaq.”
Last month CARS24 became India’s first online used-car sales unicorn — a start-up valued at more than $1bn — after raising $200m from investors including Israeli-Russian billionaire Yuri Milner’s DST Global. CARS24, which sells more than 2m vehicles on its platform annually, plans to use the funds to expand new business lines including financing.
Other start-ups that sell second-hand vehicles in south-east Asia and have recently also secured new funding include Carousell and Carro. The two Singapore-headquartered online companies raised $80m and $11m, respectively, in the past four months from investors including Japan’s Mitsubishi Corporation and South Korea’s Naver.
Roshan Raj Behera, a partner at research and consulting firm RedSeer, said there will be “some moderation” in sales growth as the health crisis improves.
But low penetration means south-east Asia’s $40bn used-car market and India’s $50bn market have “all the necessary ingredients to support the emergence of sizeable players in the not-so-distant future”, he added.
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