Carsome’s CEO on how the startup plans to profit from the regional car ownership boom

Eric Cheng, co-founder and CEO of Carsome / Photo credit: Carsome

Carsome’s US$50 million series C raise last month was notable for the involvement of several established Japanese financial services players, including the investment units of Daiwa Securities and Mitsubishi UFJ Financial Group (MUFG).

The backing from major North Asian investors points to a broader trend of legacy industries using startup investments as a way to tap Southeast Asia’s booming transportation market. Grab and Gojek have each received investments from Japanese and South Korean auto manufacturers, including Toyota, Honda, Hyundai, and Mitsubishi, who are keen to cement their positions in Southeast Asia as new paradigms like ride-hailing, car-sharing, and self-driving vehicles transform transportation in the region.

See: Here’s why Asia’s auto giants want a piece of the ride-hailing pie

When Carsome CEO Eric Cheng co-founded the startup back in early 2015, he envisioned a rather different business. Starting out as a site where drivers could buy secondhand cars, the startup evolved into a consumer-to-business (C2B) platform, helping dealers buy vehicles from their previous owners.

But with plenty of fresh capital in its coffers and the backing of major financial services players, the startup now plans to enter the consumer-facing arena once again.

Its goal? To be involved in every single used-vehicle transaction across Southeast Asia.

“We foresee that we can become like the Visa or Mastercard of auto transactions in Southeast Asia,” Cheng says. “[We] started off with helping the trading from A to B to be a lot more simpler than before. Now, we have the data to accelerate the process, from pricing to inspection and now financing and insurance. We felt that with all this, we are able to create the standard.”

Boom times

Carsome’s holistic approach to the used-car industry is one of the reasons new investors were attracted to participate in its series C round, according to Cheng. For example, MUFG’s investment in the Kuala Lumpur-based startup is likely angled at bringing more reliable financing solutions to the region’s booming market in secondhand vehicles, he says.

“Most of the banks are very traditional in Southeast Asia, so they tend to [prefer to] offer financing [for] new cars,” Cheng tells Tech in Asia. “That leaves a big gap because it’s harder for a used-car buyer to get favorable financing. The dominant players in [this] market aren’t banks, they’re non-bank financial institutions.”

This is where Carsome – with its trove of data from carrying out vehicle inspections and sales – can help.

“Firstly, [we] create confidence in the car’s condition, as we have fully recorded inspections of each and every car which goes through our platform,” Cheng says. “Secondly, we have actual transactional data, so whoever we partner with can have more accurate pricing and valuation when they’re approving a loan.”

Expansion plans

A heated race