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Dec, 2020     

ASEAN Used Cars: Digitized supply meets elevated demand

COVID has proven to be a catalyst for the segment – Southeast Asia’s ~USD50 Bn used-car market is all set to mirror the success of Carvana, Cazoo, Cars24


1. >8 Mn cars are sold every year in ASEAN; the ratio of used cars to new cars is higher than markets like India and comparable to China

More than 8 Mn cars are sold in ASEAN annually with used cars accounting for the majority of this.

Indonesia, Thailand, and Malaysia are key markets based on the volume of units sold and relative penetration of the used car segment.

The ratio of used cars to new cars sales in ASEAN is higher than in markets like India & China for Indonesia & Thailand, while Vietnam & Singapore have a higher share of new cars sold. The US is the leader and a clear outlier when it comes to the ratio of used cars to new cars sold in a year.

Total car Sales, # of units sold (in Mn), ASEAN comparison, 2019

2. Traditional used car sales journey was extremely inefficient, with teething challenges across stakeholders, limiting growth

The used car sales process has traditionally been very inefficient across developing nations with multiple intermediaries and lack of transparency, creating an environment of distrust. This greatly hampered the potential for this space to grow further.

3. Online models have however become prominent now and evolved from only lead generation to transaction-based models, thereby solving major challenges across stakeholders

Online models have been around for 5-10 years now, however the impact in initial years was limited as focus was purely on lead generation – actual transactions still happened offline, and monetization was through selling leads, advertisement, listings etc.

Transaction based models that have gained in prominence over past 2-3 years have really turned the game on its head, offering compelling value propositions to both sellers and dealers –C2B models are more prevalent now although players are extending their offerings to C2B2C as well slowly. Monetization potential has increased massively as platforms are charging a % commission on the sale, typically.

With more scale, these platforms have potential to explore other value-added services that could help in further value creation for buyer and seller alike.

Evolution of Digital models in Used Car business, Conceptual

Note: Margin enhancement is typically achieved by placing more focus on refurbishment, feature enhancement etc, thereby increasing the perceived value of the vehicle

4. COVID has proven to be a catalyst for the segment – Southeast Asia’s ~USD50 Bn used-car market is all set to mirror the success of Carvana, Cazoo, Cars24, and others

COVID has proven to be a catalyst for the segment – Southeast Asia’s ~USD50 Bn used-car market is all set to mirror the success of Carvana, Cazoo, Cars24, and others

COVID has increased demand for used cars as

  1. Buyers are seeking a safer and more reliable (vs public transport) option for personal commute 
  2. Potential new-car buyers are choosing used-cars due to uncertain macro-outlook
    Further, on the supply side, used-car dealers are using online platforms to lift their transaction volumes.

Investors have stood up and taken note of the sector as well with massive funding rounds being closed by the leading players.

While new car sales typically mirror the growth of the economy, used car sales do not have an exactly proportionate relationship and 2020 promises to throw up some positive surprises in terms of used car market growth.

Used Car market in ASEAN – 2019, USD Bn