Carsome, Carro are lobbying for a ‘golden goose’ but winning it is tricky

Used-car marketplaces Carsome and MyTukar – the Malaysian unit of Carro – are vying for a lucrative Malaysian government license that could help bolster earnings and open doors to even more revenue. However, Kuala Lumpur-based public officials tell Tech in Asia that winning such a deal may not be straightforward.

The license, which involves the inspection of commercial vehicles and the transfer of vehicle ownership from one person or company to another, comes after the Malaysian transport ministry said that they wanted to end a monopoly on these services.

Puspakom has a monopoly on vehicle inspection services in Malaysia. Carsome and Carro are eyeing the license to offer these services. / Photo credit: Puspakom

Business publication The Edge first reported the development on February 5. It said that Carsome and Carro were among a number of companies looking to snag these licenses.

The incumbent, Puspakom, is owned by politically connected tycoon Syed Mokhtar Albukhary, who also controls Bursa-listed conglomerate DRB-Hicom. Syed Mokhtar was awarded the license following a privatization exercise in the ‘90s under former prime minister Mahathir Mohamad.

The monopoly over inspection services helped Syed Mokhtar turn Puspakom into a comprehensive national vehicle inspection firm over the last three decades.

While the size of this new license isn’t reported, Puspakom’s company filings show that the company posted 13.5 million ringgit (US$2.8 million) in net profit on the back of 165.2 million ringgit (US$34.6 million) in revenue for 2022. That year, it also paid out dividends amounting to 5 million ringgit (US$1 million).

For context, MyTukar posted a gross profit of 25 million ringgit in 2022 (US$5.2 million), while the equivalent figure for Carsome’s Malaysia unit is 272 million ringgit (US$56.9 million).

(Carsome netted an after-tax loss of 257 million ringgit [US$53.8 million] at the company level for 2022, but for illustrative purposes, we subtracted revenue from cost of cars sold.)

Carsome declined comment while Carro chief financial officer Ernest Chew tells Tech in Asia that the firm would be interested in applying for the license if given the opportunity to do so.

Not so straightforward

Malaysian law stipulates that all commercial vehicles need to be inspected by Puspakom every six months. But Prime Minister Anwar Ibrahim’s government moved to progressively phase out Puspakom’s monopoly on the service.

Transport Minister Anthony Loke told the press that this is in line with the government’s aim to create a competitive service environment. Puspakom’s monopoly has been the subject of a review since 2018, but due to political instability, no material changes were made to these concessions.

Anwar’s government, however, decided to jumpstart the 2018 review and is looking at a number of firms running monopolies. Puspakom is the first company affected by the policy.

Kuala Lumpur-based public officials tell Tech in Asia on condition of anonymity that the government has yet to open a tender for vehicle inspection services. However, businesses are already lobbying the transport ministry and relevant agencies for the licenses.

All the right ingredients