CARBAR CO-FOUNDER AND CHIEF DESMOND HANG. SOURCE: SUPPLIED.
Aussie car-subscription startup Carbar has secured $50 million in debt financing, as it gears up for growth, with a focus on electric vehicles.
SmartCompany caught up with co-founder and chief Desmond Hang to talk about the uptick in demand for EVs in Australia, flexibility in car-ownership, and how this business has grown more than 20-fold over the past two years, pandemic be damned.
What is Carbar?
Founded in 2016 as a virtual car dealership, Carbar developed a three-day test-drive model, which ultimately had an 89% success rate.
The team raised $5.75 million in 2018, and noting a global trend away from car ownership, launched Carbar+, a subscription service allowing people to hire cars on a month-by-month basis.
In July 2019, Carbar secured another $16.8 million in funding, with Insurance Australia Group taking a majority stake in the business.
Since then, the subscription service has become the startup’s core product.
In fact, over the past two years, the number of subscribers has increased 21 times over, Hang tells SmartCompany.
The team has also focused on building partnerships, including pairing up with energy provider AGL to offer an electric vehicle subscription service.
Now, electric vehicles account for between 5% and 10% of the total fleet.
Why debt funding?
This bout of funding comes in the form of an asset-backed security debt facility, essentially a secured loan agreement, provided by Sydney-based Global Credit Investments.
For what Carbar does, both venture and debt funding is required, Hang explains.
But “debt is a key proponent with regards to fuel for our growth”.
Buying large numbers of vehicles can get expensive fast, he says. But cars have intrinsic values that can be leveraged.
“Cars are probably the most liquid asset out there,” he adds,
“Even more liquid than property.”
Carbar has seen exponential growth even amid a global pandemic, the effects of which has seen — among other things — far fewer cars on the roads.
When the COVID-19 crisis first struck in Australia, Hang and the team — like everyone else — hunkered down and prepared for the worst.
But instead, things actually picked up speed.
First and foremost, where traditional car dealerships were closed, Carbar was able to continue trading as an online service.
Customers can order and purchase car subscriptions online, and get the vehicle delivered to their door.
Second, Carbar’s customers were not typically the worst affected in a financial sense.
The startup’s prime user base are people with annual household income of $100,000 or more, he explains.
For them, it’s not about accessing personal transport for the lowest cost possible. It’s about managing their budget when it comes to their wheels, without having to worry about things like maintenance, warranties, insurance or roadside assistance.
It’s an “all-in concierge product,” the founder says.
“We provide that convenience.”
Finally, the uncertainty that has characterised the past 18 months or so has amplified demand for flexibility in all kinds of areas, including car ownership. Or rather, usership.
There’s a reluctance to use public transport, so while people may not be using their cars as much, they still want to drive to the supermarket, for example.
And if their situation changes, “they can always hand it back”, Hang says.
The funding will allow Carbar to put its foot down and accelerate growth even further, including expanding to more regions in Australia, working on getting more partnerships locked in, and increasing awareness of the brand in the market.
It will also, of course, bolster its fleet of vehicles, with a focus on growing its electric vehicle vertical.
When asked if he foresees uptake in EV usage continuing as a trend, he says: “It has to”.
We’re seeing the effects of climate change, he notes, and people are increasingly willing to play their small part in countering it.
“What subscription does is give people an ability to dip their toes in the water,” he explains.
“That will increasingly promote user migration across to electrification.”