From Malaysia to Mexico, secondhand cars have begun minting billion-dollar tech companies.

Carsome, an online marketplace for used cars, this week became Malaysia’s first unicorn after agreeing to a deal worth $200 million to buy iCar Asia, a vehicle listing site. It’s the second used car unicorn to emerge in Southeast Asia in the last two months, after Singapore-based Carro raised a fresh $360 million round in June, valuing the company at more than $1 billion.

They’re not alone. In November 2020, Indian platform Cars24 raised $200 million, also taking it to unicorn status. In April, SoftBank-backed Mexican secondhand vehicle marketplace Kavak hit a $4 billion valuation, less than a year after it passed the $1 billion mark.

As in the U.S., used cars are in high demand across Asia and Latin America, as people flock to private vehicles as a Covid-19-safe way to travel. The rush of deals signals something more: that investors are recognizing the potential of bringing online the vast but fragmented secondhand vehicle industry in emerging markets. Buyers often find themselves caught in a laborious and opaque process, navigating an industry dominated by small, local dealers and intermediaries. Ultimately, they need to trust that they’re being sold a safe vehicle at a decent price. 

But as incomes rise and those same consumers become more used to making large transactions online, platforms like Carsome and Cars24 are able to aggregate supply and demand. They say that by collecting large volumes of data, they can price vehicles more transparently and create a consistent, e-commerce-like experience.

Members of the “digital generation” want to buy cars the way they shop for fashion or electronics, but the user experience is lacking, said Thomas Tsao, co-founder of VC firm Gobi Partners, which led one of Carsome’s series B funding rounds. “But it’s a huge market,” he told Rest of World.

Research firm RedSeer estimates that the used car market in Southeast Asia is worth around $50 billion; in India, it’s valued at $27 billion, according to analysts at Mordor Intelligence.

Classified advertising sites, in the past, attempted to match buyer with seller but have also joined the move toward a more transactional, marketplace-like model. “[Consumers] are no longer satisfied with ‘OK, I’m going there to just find a car, and whether or not I get a lemon is up to me,’” Sanjay Shivkumar, head of autos at Carousell, Southeast Asia’s largest classifieds site, told Rest of World

Carousell, which is reportedly preparing a listing in the US via a merger with a blank-check company, has added an autos marketplace to its listings business. Carsome is also rumored to be exploring a SPAC listing in New York.

“[Consumers] are no longer satisfied with ‘OK, I'm going there to just find a car, and whether or not I get a lemon is up to me'."

Like so many other unicorns, their ability to amass data leads to the inevitable tilt to fintech. A small fraction of used cars are bought on finance — just 17% in India, according to RedSeer, and online marketplaces are well positioned to sell higher-margin services, like loans, to car buyers.

Above all, that’s the cause for investor enthusiasm, Gobi Partners’ Tsao said. “Companies like Carsome … they can work with financial partners. They can give you a loan with much greater confidence because they know what the car is worth.” 

He added: “And they’re more likely to give you the loan, because if … they have to repossess it, they have a very high conviction that they can move the car.”