Behind Carousell’s bid for the $61b used-car space in SEA

In 2017, Carousell piloted Carousell Motors, a standalone app for used-car listings in Singapore. The move was inspired by user feedback: Interested buyers wanted more details than a picture of the car, its price, and who the dealer was – the details that Carousell’s primary marketplace usually offered.

Five years on, Carousell Motors is now called Carousell Auto. It’s no longer a one-market project or a separate app but instead has become a big bet for the Singapore-based classifieds giant as it eyes a listing on the public markets.

For Carousell, it appears to be the right time to enter the used-car space, which can bring higher ticket sizes compared to the other goods sold on its platform. The growth in regional car sales – including used cars – is driven by rising middle-class households in Southeast Asia and a shift in how people spend discretionary income, shares Nishita Aggarwal, industry analyst at the Economist Intelligence Unit.

At the same time, this move puts Carousell directly in competition with regional used-car players like Carro and Carsome. These rivals have had a head start in the industry along with sizable war chests.

Carousell Autos / Photo courtesy: Carousell

That said, the results for Carousell so far are promising – among the company’s business lines, used cars have become the top revenue contributor in 2020. And while Carousell’s goal remains to “accelerate the secondhand wave” in Southeast Asia, the auto vertical will “continue to play a very important role in the foreseeable future,” says Gaurav Bhasin, chief strategy officer at Carousell Group.

The total addressable market for used cars in Southeast Asia is estimated to be US$61.1 billion.

Betting on the strongest horse

As Tech in Asia wrote before, Carousell’s classifieds empire was in need of a transformation. While the company is present in eight markets, Carousell made it to Data.ai’s (previously App Annie) list of top five shopping app downloads only in Singapore (as of mid-2021).

The idea for Carousell’s auto business can be traced to 2016, when Carousell made its first acquisition in the car space through its deal with Singapore-based Caarly.

Carousell already had car listings on its platform at the time, but it saw the need to focus on used cars since the company was noticing a greater demand for high-value items. More than 50% of users were now over 25 years old and had increasing purchasing power.

At the same time, Carousell’s focus on classifieds made it wary about listing merchants next to individual sellers. Unlike for low-ticket items, dealers tend to dominate the used-car space, not individuals – this could likely dilute the app’s community aspect.

That’s why the company decided to create Carousell Auto as a separate, standalone vertical. This makes sense in several ways. For instance, the car business is big enough to be a separate category, as competitors such as Carro and Carsome have proven with their presence across Southeast Asia.

But perhaps more importantly, a vertical-specific distinction can more clearly show revenue contributions. After Caarly’s 2016 acquisition, Carousell co-founder and CEO Siu Rui Quek said that high-value segments would be a key revenue driver for the company.

He was right. As of April last year, Carousell’s autos vertical accounted for a third of the Group’s revenue – the largest contributor to its top line.

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