Southeast Asia’s used-car marketplace Carro is said to be raising about $100 million as it gears up for a stock-market debut, Bloomberg reported on Monday.

The Singapore-headquartered company is speaking with investors for a pre-IPO (initial public offering) funding round which could raise its valuation to more than $1.5 billion, chief executive officer Aaron Tan said in an interview.

The firm, which has about 4,500 employees and counts SoftBank Group as well as Singapore’s GIC and Temasek among its investors, just posted its first annual operating profit.

Carro is trying to win over investors scarred by an implosion in start-up valuations over the past two years. The startup is also operating in a highly competitive market, one that’s resistant to change. Tan, who founded Carro in 2015, is betting on innovations to stand out from the pack.

The CEO demonstrated a tool for instance he called the Shazam of engines, which analyses the health of a second-hand car from the sound of its motor. And the firm offers a five-day no-questions-asked return policy, unheard-of in many parts of Asia.

To top it all off, Carro intends to expand its operations in Japan and Hong Kong this year.

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

Carro is raising capital during one of the hardest possible times for fledgling firms. The Southeast Asia technology industry has been plagued by job cuts, CEO resignations and falling startup valuations, making it difficult for companies to debut on public markets, the report added.

Used car prices are in retreat, making it harder to flip vehicles at a gain, the report said, adding that elevated interest rates and inflation are pushing up the prices of car loans, making them less affordable.

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

To get shoppers more comfortable with buying online, the upstarts have also introduced Amazon-like features, such as no-quibble returns and delivery within a few days, the report noted.

As a result, more consumers in Southeast Asia are starting to skip traditional dealerships in favor of buying used cars online. But for Carro and Carsome, a big test lies in how well they can leverage technology to better predict the prices and conditions of vehicles, shorten the time taken to get cars ready for their new owners and push a suite of products including loans and insurance.

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

To help with that, Carro 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 Malaysia-based Carsome says it takes about 45 days to sell a vehicle to a consumer. That compares with about 46 days for Carvana, their US-listed peer.

“It’s easy to do this at a ‘mom-and-pop shop’ level,” Tan was quoted as saying. “But if you want to do this at scale, you need investments, you need a lot of space, you need the manpower and of course the tech and systems.”

To fuel its growth, Carro is planning further expansion in Japan and Hong Kong, two markets which Carro’s Tan says have big potential.

Last month, Carro announced its acquisition of Beyond Cars, one of the leading used car platforms in Hong Kong.
Carro said in a statement then that with Hong Kong under its belt, the firm is now present in a total of seven markets, including Singapore, Malaysia, Indonesia, Thailand, Japan, and Taiwan.

In January, Carro has unveiled two new branches in Kingkaew and Tiwanon, bringing its total branches in Thailand to five.

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