myric cheng drove carsome become Malaysia’s first tech unicorn during the funding boom in 2021. Now, amid higher interest rates and concerns about an impending recession, Carsome’s co-founder and CEO is changing course to focus on profitability in an effort to adapt to the lower risk environment. after more than eight years of dizzying growth.
Carsome is expected to break even by the end of the year and reach full-year profits in 2024, Cheng said in an interview on the sidelines of the Forbes Global CEO Conference In Singapore. “We are now sacrificing the twice-every-two-year growth rate to focus on our (profit) margin,” she said. “That includes us being able to improve the acceptance rate of every transaction that happens on our platform by optimizing pricing and workforce, and also being able to utilize the marketing awareness we’ve created.”
Carsome’s profit driver is its retail business that offers reconditioned cars, as well as related offerings such as car financing, insurance and after-sales services. The retail business, launched about three years ago, accounted for 35% of Carsome’s $1.5 billion in 2022 revenue. Its commercial margin, or the profit on the transaction after deducting associated operating costs, comes to around 13%. %, doubling that of the main wholesale business. business, Cheng said.
The push toward profitability comes as Carsome continues to face fierce competition in Southeast Asia’s auto e-commerce industry. Carsome, which operates in Malaysia, Indonesia, Thailand, Singapore and most recently the Philippines, claims to be the region’s largest online used car platform by revenue and transactions. Last year, the company sold more than 150,000 vehicles, equivalent to a 3% market share of Southeast Asia’s used car e-commerce market, Cheng said.
Going head-to-head with Carsome is SoftBank Vision Fund 2-backed Carro, which operates in Singapore, Malaysia, Indonesia, Thailand and, most recently, Japan. Carro, which claims to be Southeast Asia’s most profitable online second-hand car marketplace, said its revenue surpassed $800 million in the financial year ending March with more than 120,000 vehicles sold.
“The fact that we are the market leader by transactions demonstrates our ability to replicate the operating manual from one country to another,” Cheng said. “No one within the region can claim the type of transaction of the size that we have, simply because the operational manual and knowledge are essential to improve conversion and decision making.”
While Cheng is improving Carsome’s results, he is ensuring that expanding market share doesn’t take a backseat. In June, the company raised an undisclosed amount from investors, including 65 Equity Partners, a subsidiary of Singapore state investment firm Temasek, as well as Qatar Investment Authority and Hong-based venture capital firm Gobi Partners. Kong and Kuala Lumpur. It also obtained a line of credit (undisclosed amount) from EvolutionX Debt Capital, a venture debt fund launched by DBS and Temasek.
Cheng said Carsome’s valuation has remained at $1.7 billion since its Series E round of 290 million dollars last January. The latest financing, which has raised Carsome’s liquidity position to about $200 million, will allow the company to pursue several growth initiatives, he said. These include the expansion of car financing, insurance and after-sales services outside of Malaysia to other markets in which Carsome operates.
“What we want to achieve next year is to continue maintaining our growth trend, capture more market share from that 3% to around 5%, and then get closer to 10% in the following years, but keeping the company as profitable. as we take advantage of all these opportunities,” Cheng said.
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