This prediction on Carsome is made on 25th March 2025, after Carsome announced profitability for the year with EBITDA of USD 10.5 Million.
The numbers look impressive, so why do I predict they will go bankrupt?
Here are 3 reasons:
1: The Numbers
While EBITDA of USD 10M looks good on paper, we have to see the definition of EBITDA, which is Earnings before interest, taxes, depreciation and amortisation.
As Carsome has borrowed loans from banks to fund their business and chase more sales, these loan interest costs are excluded from EBITDA calculation.
Same goes for car purchase which has depreciation cost, these cost are excluded as well.
So if you take out these 2 big costs, it’s like a way of playing with the numbers to somehow “force” profitability.
Besides showing EBITDA, I find it curious when Carsome only announce EBITDA and did not mention Revenue growth and actual profit which are key measurables of a business health.
This to me is a red flag.
While my intuition may be wrong, this EBITDA news gives me a bad vibe that not all is as well as they try to display to the public.
2: Declining Business Model
This is a keywords tool I use to check the popularity of Carsome’s brand name.
A rule of thumb is the more people search for your brand name, the better.
However, if you refer to the search trend below, it’s declining for many different variations of their brand name:
A declining brand name search is definitely something to be concerned of, especially when your customers are B2C and not B2B, where B2B businesses typically have recurring revenue from existing clients.
So even if brand name search drop, it’s not a cause for concern if the business model is B2B.
However, Carsome’s business model is B2C where they sell to customers, so with lesser searches of their brand name, it shows that customers are starting to look elsewhere.
3: Lack of MOAT – Easy to Copy
Last point is a lack of MOAT. It’s easy to copy Carsome’s model and over the years we have seen many competitors such as My Tukar, Mudah, Carlist.
Given that the margins are already so thin, this industry might be a red ocean.
Conclusion
The verdict is out there whether Carsome can perform in the upcoming years.
If they can sustain the next 5 years and thrive, I’ll be happy to be proven wrong.
Until then, let’s continue to see their performance over the years.
Disclaimer: This is purely my personal opinion on Carsome, as always do your own research.
