12-6-2023 (KUALA LUMPUR) In a troubling turn of events, online used car platform Carsome is seeking financial aid from Malaysian government entities, including Permodalan Nasional Berhad, Khazanah Nasional, and the Employees Provident Fund. With its venture capital funding drying up and the company failing to turn a profit, questions arise about the sustainability and transparency of Carsome’s business model. As taxpayers, it becomes crucial to examine whether investing public funds into a cash-burning enterprise like Carsome is a wise decision.
While Carsome has gained popularity in the used car marketplace, its financial records reveal a consistent pattern of losses and reliance on investor money. The company’s revenue streams and profitability remain questionable, prompting concerns about its long-term viability. Furthermore, hidden incentives and subsidies provided to car salesmen raise doubts about the fairness and transparency of Carsome’s operations.
Carsome’s customer-facing promotions are a common practice, but behind the scenes, additional incentives and promotions have come to light. These undisclosed benefits create suspicion of preferential treatment and potentially unethical practices. For example, car salesmen may be influenced to direct customers exclusively to Carsome, driven by the high financial rewards they receive. Such practices raise concerns about the true value and transparency of transactions for customers.
Carsome’s financial struggles can be attributed, in part, to the significant amount of money lost on used car sales incentives, subsidies, and promotions. While some incentives may be genuine commissions for referring vehicle sellers, the sheer volume and unsustainability of these financial rewards raise eyebrows. The company’s audited report from 2021 revealed a staggering USD14.6 million spent on “channel acquisition cost,” suggesting excessive spending on incentives given to car salesmen.
Round-tripping, a practice that artificially inflates revenue without providing real economic benefit, has been a concern in the industry. While not necessarily illegal, it is essential to scrutinize transactions for signs of round-tripping. There are allegations that Carsome may be involved in such activities, with certain dealers benefiting from repeated transactions with the company. These suspicious practices raise questions about the integrity of Carsome’s financial reporting.
As competition intensifies, reports indicate that dealers and syndicates have taken advantage of Carsome’s growth ambitions. Instances have been uncovered where vehicles pledged to financial institutions were sold by dealers to Carsome, resulting in significant financial losses for the company. The questionable conduct of some dealers and syndicates highlights the vulnerability and potential risks faced by Carsome in its operations.
Despite its financial troubles, Carsome has made a plea to Malaysian government entities for additional funding. Seeking investments from various government bodies, including Permodalan Nasional Berhad, Khazanah Nasional, and the Employees Provident Fund, Carsome aims to secure at least USD10 million. However, considering the company’s estimated EBITDA loss exceeding USD100 million in 2022, this request raises concerns about the responsible use of taxpayer money.
