Car dealership startup Carma is bringing Australia into the used car dealership spotlight after it raised $20 million, the equivalent of AUD $28 million in a seed funding round from American investment firm Tiger Global.
Carma, which has been operating in stealth for the past nine months, says that the new funding has allowed the company to develop its website, establish its first inspection and reconditioning facility in Sydney, as well as hire an executive team. The company joins other global car dealership startups such as Cazoo in the UK, Kavak in Mexico, Canada Drives and Clutch in Canada, and Vroom and Carvana in the US.
Startups like Carma and the aforementioned companies are helping to abate the effect of the semiconductor shortages which have been an impediment in the production of new vehicles. As the demand for vehicles continues to rise without a panacea for the semiconductor shortage in reach, people have begun to turn to used cars, thereby creating an opportunity in the sector.
Carma says its services will only be open to people in Sydney at first but will eventually be opened throughout the state of New South Wales in the coming months and eventually to Brisbane and Melbourne by next year. The startup says it will have another fundraising round by next year to fuel its expansion plans.
In a statement, Carma co-founder and CEO, Lachlan MacGregorsaid that “Investment in the digital used car dealership space is very active globally, given the international success of the model. Having this significant backing from Tiger Global has been a fantastic vote of confidence in Carma and allowed us to move rapidly to build out an exceptional team, technology stack and physical infrastructure. We skipped the start-up phase and were able to go straight to scaling up with a proven business model.”
Speaking about its investment in Karma, Griffin Schroeder, partner at Tiger Global, said that “We are convinced there is a massive opportunity to disrupt the used car industry in Australia by replicating an online, full-stack model that we see achieving success in the US and globally”.
While Carma has a fleet of 300 vehicles which it sources from private sellers, dealers and from auctions, it is pushing towards 500 and plans to launch its online platform.
A spokesperson for Carma explained that “Typically, our cars are under five years old, with less than 100,000 kms (62,137 miles), and with the latest features. After we buy them, they undergo a thorough mechanical inspection, repair and reconditioning process in-house, before being photographed at our state-of-the-art facility in Sydney. We will only sell cars that meet our high standards.”
For now, Carma has no major competition and plans to leverage all the opportunities available in the Australian market.