S’pore startup Carro looks to raise S$136M in pre-IPO funding round, aims for S$2B valuation

Used-car marketplace Carro is currently in talks for a pre-IPO (initial public offering) funding round which could raise its valuation to more than S$2 billion, Bloomberg reports.

According to chief executive officer Aaron Tan, the company is raising about S$136 million, hoping that these new funds will cement Carro as Southeast Asia’s top player.

“We are ready for an IPO,” Tan said. “Whether or not we list depends on the broader macro environment.”

The Singapore-based firm, whose investors include SoftBank Group and Temasek, just posted its first annual operating profit despite operating in a highly competitive market that is resistant to change. Earnings before interest, taxes, depreciation and amortisation jumped to over US$33 million for the year ended last month, from US$4 million a year earlier.

Employing technology to stay ahead of the competition

To stay ahead of competitors, Carro relies on technology and innovation to capture market share. For instance, the company has launched a tool that can analyse the health of a second-hand car from the sound of its motor and introduced Amazon-like features, such as no-quibble returns and delivery within a few days, which are both unheard-of in many parts of Southeast Asia.

Over the past nine years, the firm has invested hundreds of millions of dollars to acquire inventory, build out delivery networks, set up refurbishment centres and fit out used-car showrooms. 

As a result, more consumers in Southeast Asia are starting to skip traditional dealerships and buy used cars online.

But the challenge lies in how well the firm can leverage technology to better predict vehicle prices and conditions, shorten the time taken to prepare cars for their new owners, and promote a suite of products, including loans and insurance.

To move tens of thousands of cars each month, Carro has to oversee over a hundred trailers each day, plan efficient routes to drop off vehicles from one city to another and manage more than US$100 million in inventory at any given point. 

To streamline this, the firm has built a QR code dashboard to track cars at each stage of the trading, refurbishment and delivery process. On average, cars stay with Carro for about 26 days, while it takes about 45 days for its Malaysia-based rival firm, Carsome, to sell a vehicle to a consumer.

Recently, the company has also been busy taking more strategic moves, such as expanding into Hong Kong and rebranding its subsidiary in Malaysia.

A rocky road ahead

However, Carro must prepare for a challenging road ahead. The Southeast Asian tech industry has been hard-hit by layoffs, CEO resignations and declining startup valuations, presenting significant hurdles for companies seeking to go public.

Shares of regional tech giants, including Grab, Sea Group and GoTo, have waned as they work to balance growth and profitability.

Meanwhile, the decline in used car prices adds to the challenge of profiting from vehicle sales. Highinterest rates and inflation are driving up the costs of car loans, rendering them less accessible for buyers.

Featured Image Credit: Carro