Carro uses technology and AI to inject trustworthiness into second-hand car market, gears up for US IPO.
When one thinks of the second-hand car market, often it is of shady dealers trying to pull a fast one over an unsuspecting buyer. However, Aaron Tan — the CEO and founder of car marketplace Carro — will tell you that it is actually one of the “most misunderstood and mistrusted industries.”
There are many stereotypes associated with the used car business. “People tend to think poorly of used car dealers and for that matter think that they may be tricked into buying a lemon,” he continues.
With that in mind, Tan and his college friends — Aditya Lesmana and Kelvin Chng, from Carnegie Mellon’s School of Computer Science in the US — saw the opportunity to revitalise the auto resale market here by enabling a convenient, yet trustworthy, way to purchase used cars.
Unlike the traditional way of dealing — where the buyer has to go down and view the car with the dealer or seller — Carro allows the transaction to take place completely online.
The company, founded in 2015, claims to be “the region’s first contactless purchasing service”. This means that customers can browse for certified pre-owned cars on Carro’s website, and then purchase and have it delivered to an agreed place. To add to the buying experience, the company also offers a three-day return policy to ensure maximum customer satisfaction.
Driven by curiosity
Tan’s ability to spot and build a fast-growing business out of a new trend has earned him the title of EY Entrepreneur Of The Year — Digital Automotive Solutions.
Entrepreneurship came early for Tan. He founded his first company more than two decades ago – when he was just 13. By the time he was 21, he had sold two companies.
Tan says he started everything simply out of curiosity. He is also a programmer by training, an interest that started during the dot-com boom of the early 2000s. Then fascinated by the likes of AltaVista and Yahoo, Tan would often visit libraries to dive into books about programming. He then applied these qualities on analysing data, which in turn led to the creation of Carro — a portmanteau combined from the words ‘car’ and ‘hero’.
But the company is more than just an online car marketplace. This is especially crucial in Singapore, where e-commerce sites are a dime a dozen and dealers and sellers simply list their cars on the platform and everything is left at the buyer’s risk.
Carro operates the entire chain of car ownership, which means everything ranging from car financing, servicing and repairs can be handled through its platform, along with after-sales services like same-day car delivery and insurance renewal, all on a single site.
The company claims on its website that all cars go through a “150-point inspection” by its engineers. All cars are listed with high-resolution pictures, so as to allow customers to really examine their prospective cars before purchase.
Aware of the high cost of owning a car in Singapore, Tan says Carro further differentiated itself by allowing customers to drive a car, without owning one. He calls this a “Netflix for cars” programme: Basically, customers can pay only a monthly service fee to “subscribe” to a vehicle. “The programme grants customers the flexibility of selecting a plan with a flat fee and driving off with a car of their choice without the hassle of owning a car,” he adds.
Clearly, people have taken well to this idea. While Tan did not give details, he says that the company has been growing “super quickly”, pointing out Carro was named the fastest-growing company in the Asia Pacific region earlier this year by the Financial Times.
As of March, Carro — which has a headcount of around 1,000 — has hit US$1 billion ($1.3 billion) in annualised gross merchandise value (GMV) run rate for its 2021 financial year, making it a “unicorn”, the term used for start-ups that have crossed the $1 billion mark in market valuation.
He also says that revenue in the same period saw a 70% m-o-m growth. The company has also “achieved record volumes, revenues, gross profit and have been Ebitda positive for two consecutive years.” Moving forward, the plan is to continue hitting two to three times growth over the next few years, Tan adds.
Venturing overseas
Despite being founded in Singapore, Carro has expanded and now has a presence in Malaysia, Indonesia and Thailand. But considering the fact that Southeast Asia is a myriad of different economies with diverging regulations around vehicle ownership, how did the company navigate this complex web of markets?
Tan acknowledges that Southeast Asia is a very fragmented market. He says: “what works in Indonesia, may not work in Thailand, and maybe different compared to Singapore.
To get around this, Carro has adopted a “by-local-for-local” approach, where it has local co-founding teams working each market. For example, one challenge that Carro faced when the Covid-19 pandemic hit the Southeast Asian region was that showrooms were forced to shut, and customers could not stop by physically to sell or see and buy their cars.
In Indonesia, the company launched an ‘Automall’ outside of Jakarta. There, customers can purchase cars completely contactless — right from the inspection stage to the payment process. In Malaysia, the company — through its local subsidiary company MyTukar — has successfully deployed an AI-driven system that detects car defects and preserves privacy by masking the car plates.
The technology helps to detect car defects within three seconds, automates car inspection, and uses AI to detect multiple types of car defects — from fit and finish, panel alignment, damage, dents, scrapes and scratches.
IPO plans
After shaking up the second-hand car market in the region, Carro is gearing up to tap on public funds, so as to embark on the next stage of its expansion plans. Assuming the market permits, Tan is aiming to list the company in the next 18 months in the US.
Listing the company will help increase awareness and trust with the brand and “more importantly, allow us to raise more funds to provide the Carro experience to more customers across the world.”
While this is a huge milestone and goal to shoot for, Carro is in “no rush”. In June, the company said it raised US$360 million in a Series C funding round led by SoftBank’s Vision Fund 2 and several Indonesia-based funds, according to CNBC.
The company said the new funds from the funding would be used to strengthen its market position and expand on products and services sold across all its markets. It would also be used to speed up the development of the company’s AI capabilities.
When asked why he chose to list in the US and not in Singapore — where the company is founded — Tan says the choice of venue was “entirely market-driven and pricing dependent at a particular snapshot in time.”
For now, a US listing is a more viable option for companies in the sector, given the “robust public competition in the same sec-tor, such as companies like Carvana and Vroom” on the US exchanges.
“That said, never say never. The market moves and so should our plans. Nothing is cast in stone and as a start-up, we have to adapt and make the most optimal decision when the opportunity presents itself.”
Photo: Carro
