Analysis: Carro is on track to hit over $750m in revenue for latest financial year

Singapore-based Carro’s sizable funding round, which puts it past the billion-dollar mark, hints at the massive potential for used-cars marketplaces. More importantly, Carro is not done growing yet.

The company’s co-founder and CEO Aaron Tan tells Tech in Asia that its revenue surged 2.5x to around S$300 million (US$226 million) for the financial year ending (FYE) in March 2021, with most of the growth coming from the buying and selling of cars.

The Carro team / Photo credit: Carro

He adds that the startup should be able to hit roughly S$1 billion (US$753 million) in revenues for FYE 2022 if there isn’t “too much trouble.” That would represent a growth of more than 3x. It recorded only US$82.4 million in revenue in FYE 2020, according to VentureCap Insights data.

Tan says that Carro’s actual revenues may be “far more” than the ballpark amount he gave. “While we could be transacting US$400 million to US$500 million in gross merchandise volume (GMV) [in our largest market of Indonesia], we only mark a very small portion of that as revenues – in line with local tax regulations,” he added.

But Tan pointed out that unlike ecommerce marketplaces where revenue is typically a small percentage of GMV, auto marketplaces book revenue differently. This means that Carro’s GMV and revenue numbers aren’t far apart.

As a result, the company is tracking only a 10% gross profit margin for FYE 2020. Carsome, Carro’s Malaysia-based rival, is also registering a similarly thin margin.

That said, Carro has been able to keep its EBITDA (earnings before interest, tax, depreciation, and amortization) positive status for the second straight year this 2021. This comes after the company registered US$637,000 in adjusted EBITDA in FYE 2020 despite an operating loss, according to its financial statement.

Competitors like Carsome have “margin profiles are closer to low single digits or negatives,” Tan claims. “Ultimately, it’s very clear who is subsidizing the market and who is growing with poor unit economics,” he contends.

Meanwhile, Carsome made US$206.8 million in revenues in the financial year ending December 31, 2019.

While Carsome declined to discuss fundraising updates, the company sent a statement to Tech in Asia saying that it will hit US$800 million in annualized revenue. It is also on track to reach US$1 billion by the end of this quarter, which would put it ahead of Carro for that metric.

“We take pride in our sustainable growth, achieved through driving the market with a viable business model,” Carsome said.