Aaron Tan is going places.
You can get an entire car in less than five minutes — with credit approval, with insurance,
because we own the whole value chain.
As the co-founder of a newly crowned unicorn and one of Asia Pacific’s fastest growing start-ups,
Carro’s CEO is now on the road to an IPO.
Some of my friends joke that I grew a horn and stuff like that but, you know, honestly,
it doesn’t mean anything.
And with investors including Softbank getting onboard, he has no plans to slow down.
The question is, okay, now that we have reached $1 billion, how do we reach $10 billion?
How do we reach $100 billion?
Carro, a play on the words ‘car hero,’ is a Southeast Asian auto marketplace designed
to simplify car deals using AI technology.
The company was founded in 2015 by college friends Aaron Tan,
Aditya Lesmana and Kelvin Chng.
In June 2021, it achieved coveted $1 billion unicorn status after securing $360 million
in funding from big name backers such as SoftBank and Indonesian-based fund EV Growth.
The deal takes total funding to over half a billion dollars and pits Carro alongside
key competitors in an industry worth $50 billion and growing.
But as CEO Aaron told me when we sat down at his Singapore HQ, the journey has been long.
36-year-old Aaron’s entrepreneurial story started when he was 13.
I went on the internet in, I would say 1996, and that was when I first went on the internet
and I thought, hey, this is super interesting.
And then I effectively went into the local library and tried to understand how do you
build a search engine.
As a teenager growing up in Singapore, the computer whizz would earn extra cash by building
and selling websites.
But it was later, while working as a venture capitalist in the U.S., that he saw an opportunity
to combine business prowess with his true passion: trading cars.
One of the things that I found super enjoyable really is this whole buying and selling of cars.
I think that’s one part of it.
The interest in automotive.
The second part of it is my training.
When I was in the U.S. as a VC for many years, I remember very clearly, I met all kinds of
automotive companies – your Beepi, your Uber, your DriveShift.
What this shows me was the momentum in the space.
While the auto resale market was flourishing in the U.S., the same couldn’t be said for
Southeast Asia.
It was famously opaque, with several middlemen making it difficult for buyers and sellers
to get the best deals.
Aaron wanted to change that.
So, returning to Singapore in 2015, he teamed up with his classmates from Carnegie Mellon’s
School of Computer Science to create an algorithm that would do just that.
I wouldn’t say that I tricked my co-founders into founding the company together, but I
think I sold the opportunity that this could be much more interesting than whatever they
were doing.
You pulled at the emotional heartstrings, I think.
And I think one thing that I always give thanks to is that my team tends to be very international
from day zero.
My co-founders Indonesians or Thais, so this makes it a lot easier for us when we enter
a market.
We don’t have as much licensing issues, tax issues, because we have locals fronting
the market and that is extremely important when you are in Southeast Asia.
The trio was onto something.
In a region with a vast and growing, digital-savvy middle class, price sensitive consumers were
increasingly opting for secondhand models.
Euromonitor’s senior research consultant, Justinas Liuima, explained.
Expanding middle class combined with low car ownership rates in Southeast Asia were really
the main factors that stimulated new car sales, and eventually this translated into a vibrant
used car market as well.
The new car market grew from three million units in 2015 to almost four million units
in 2019, and eventually these new cars, after the period of five to eight years, they were
entered into the secondary market.
Carro capitalized on that demand, rolling out its online offering for individuals and
wholesale dealers across Indonesia, Thailand, and Malaysia in the years that followed.
Meantime, it added end-to-end financial services like loans, insurance and aftercare.
By 2019, inspired by Netflix and Spotify, the company launched Singapore’s first car
subscription service, allowing users to lease a vehicle for a monthly fee, with tax, warranty,
and maintenance all included.
In subscription, what we saw was the changing behavior of car ownership.
Really the gap in the market was to look for people that want that flexibility.
And, more importantly, they actually want to try out new cars.
This has played very well for us for instance in EVs, where people are like I actually do
not know whether EVs are suitable for my lifestyle.
Can I try this for six months, 12 months, and you know we found a good gap in the market
that way.
Then, in 2020, the pandemic struck.
But what was a major roadblock for many start-ups turned out to be an opportunity for Aaron
and his team.
Concerns over hygiene and personal safety sparked new demand for private transport options.
And with borders closed and a global microchip shortage limiting car production,
used car sales surged.
Covid has definitely helped accelerate our whole digitalization internally and also externally,
to the general public.
One of the many things that we launched during Covid was this Showroom Anywhere concept.
The idea is very simple.
We want you to be able to do a test drive, or for that matter enter a car itself,
without any key.
Basically, without seeing a single human, get into the vehicle, do your test drive if
you need to, kick the tires, literally.
And as you’re done, just swipe out and the car will just lock.
And then if you want to buy the car, just go onto the website or the app, click buy
it now and literally key in a few things, and you can walk away with the car.
As of March 2021, Carro recorded revenues of $300 million, up 2.5 times on the previous year.
The six-year-old start-up says it is now profitable.
However, that growth comes against a backdrop of growing scrutiny on the auto industry.
Transportation accounts for almost a quarter (24%) of global carbon emissions, of which
road vehicles make up 75%.
And even as governments and automakers make plans to phase out traditional combustion
engine cars with electric vehicles, many existing gas guzzlers are simply exported to developing markets.
New cars are more efficient, they pollute less, and if the country relies on the used
car sales a lot, it increases the overall emissions, especially in the densely populated
urban areas, and adds to the health concerns in the long-term.
Carro, for its part, says it is playing an important role in the transition to greener
transport methods.
Our job is to reuse, our job is to enable that recycling or the reusing of the vehicles
in the shortest period of time.
And the second part of this is that EVs is a strong tailwind for us, because this encourages change.
And for a platform like us we strive whenever there is change in the market.
Sustainability will continue to be one of the many things on Aaron’s agenda as he
sets out to list his company within the next 18 to 24 months.
With regional expansion, AI developments, and acquisitions all on the cards, one thing’s
for sure -- it’s going to be an eventful ride.
What needs to happen is that between now and then, get the company ready, controls need
to be in place, people need to be in place, compliance needs to be in place.
Only then can we then say that okay, we’re ready to go public 12 to 18 months from now.