This article first appeared in The Edge Malaysia Weekly on January 29, 2024 - February 4, 2024

OTHER than the usual suspects — Sime Darby Bhd, Berjaya Corp Bhd and Naza group — unicorn start-ups Carsome and MyTukar are also understood to have expressed interest in securing licences to undertake commercial vehicle inspection and transfer of ownership inspection services in line with the Ministry of Transport’s (MoT) aim to end Puspakom Sdn Bhd’s current monopoly.

Puspakom, a wholly-owned unit of DRB-Hicom Bhd — a diversified conglomerate that is 55.92% controlled by businessman Tan Sri Syed Mokhtar Albukhary — has been the only comprehensive national vehicle inspection company appointed by the Malaysian government for almost three decades.

When contacted by The Edge, Carsome gave a standard “no comment” reply while Carro, the parent company of MyTukar, said it was “evaluating whether we would add value to the [used-car] ecosystem by applying for the (said) licence, potentially with strong like-minded partners. We believe we have a unique proposition combining nationwide inspection capabilities, a trusted credible platform used by consumers and dealers, and tech track record. If given the opportunity, we would like to support the government’s call and invest in furthering the ministry’s digitalisation road map (digital road tax, digital driving licence).”

Carsome is a local used-car platform founded by Eric Cheng and an investee company of Malaysia’s sovereign wealth fund Khazanah Nasional Bhd. Carro is a used-car outfit based in Singapore but with a strong presence in Malaysia and is also an investee company of state-controlled unit trust outfit Permodalan Nasional Bhd (PNB).

It is worth noting that auto assembler and retail player Sime Darby, also a PNB unit, is an investor in Carro. Based on news reports published in August 2022, Sime Darby had invested US$5 million in Carro to participate in the “new mobility ecosystem”. PNB has just under 47% equity interest in Sime Darby.

Edaran Otomobil Nasional Bhd, a wholly-owned subsidiary of DRB-Hicom, also made a strategic investment in Genie Malaysia, a subsidiary and financing arm of Carro, according to news reports published in October last year.

Carsome raised US$290 million in its Series E funding in January 2022, which counted Sunway and YTL Group among its local investors, according to news reports.

According to industry sources, the government has not initiated the application process yet but certain parties are already actively engaging and lobbying personnel at the MoT and Road Transport Department (JPJ) for the licences.

Minister of Transport Anthony Loke announced in March last year that the ministry aimed to end Puspakom’s monopoly in commercial vehicle inspection. He announced that even if the government extended Puspakom’s contract for another 15 years after its concession expires on Aug 31, 2024, other qualified parties will be able to apply for a licence to undertake commercial vehicle inspection in the first quarter of this year.

Loke is reported to have said at a press conference in March last year that “The decision [to end Puspakom’s monopoly] is in line with the government’s desire to create a competitive service environment … This decision means that Puspakom will no longer be the sole provider of vehicle inspection services on behalf of the Road Transport Department from Sept 1, 2024.”

MoT had yet to respond to questions from The Edge at the close of business last Friday.

According to a source, the government is allowing industry players to apply for the B2 licence for routine inspection of commercial vehicles and the B5 licence for the transfer of ownership inspection.

The Road Transport Act 1987 requires that all commercial vehicles undergo routine inspection by Puspakom every six months.

The source says it will be interesting to see how the licences are awarded as there is likely to be the formation of consortiums with conglomerates with clout and the participation of even members of royal families.

“The licences should be awarded based on the applicants’ track record, the value the applicants can add to the used-car ecosystem, their existing capability to meet market demand and provide meaningful competition to existing players, and be backed by strong shareholders. They should also be able to provide a road map to digitalise the ecosystem and implement innovation to provide high-quality inspection services and best customer experience,” the source adds.

Carsome and MyTukar are natural contenders for these licences as they have played an instrumental role in improving the ecosystem of the used-car market.

Carsome and MyTukar inspect several thousand used cars a month. They source these cars from the retail market and auction them online to used-car dealers nationwide. An inspection report is uploaded for each of these cars so that all car dealers have access to standardised and reliable information before the bidding process starts.

In other words, used-car platforms play a role similar to a judge when it comes to ensuring the condition and quality of used cars. By producing comprehensive and reliable inspection reports, consumers can avoid being cheated or shortchanged by unscrupulous used-car dealers, while used-car dealers can rely on them to make their bids.

Carsome’s official website shows that it conducts a 175-point inspection of used cars that go through its platform while MyTukar has a 160-point inspection process in place.

A check on the Companies Commission of Malaysia indicates that Puspakom chalked up an after-tax profit of RM13.5 million on revenue of RM165.22 million for its financial year ended December 2022. In FY2021, the company made RM10.3 million in after-tax profit from RM136.68 million in turnover. Its FY2022 profit was the highest in five years.

It is noteworthy that Puspakom has paid out more than RM32 million in dividends over the last five years.

As at end-December 2022, Puspakom had retained earnings of RM100.07 million, total assets of RM194.65 million and total liabilities of RM17.18 million. 

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