How Broom drives changes in Indonesia’s surging used car market
Published on September 25, 2023
Pandu Adi Laras, Co-founder and CEO of Indonesia-based used car tech startup Broom, founded the company in 2021 to help independent auto dealers overcome daily challenges, including inventory management, buyer acquisition, and financing. In just a few years, the platform, operating as a digital used car showroom, has grown to more than 7,000 members.
Broom entered the market opportunistically, as Indonesia’s used car market is projected to grow at a double-digit rate of 15.7% from 2020 to 2025, following a relatively modest 4.5% growth from 2014 to 2019, as reported by Ken Research. By 2028, the market is forecast to exceed US$70.5 billion – a giant growth spike relative to the current US$50.8 billion.
On a recent episode of Indonesia Digital Deconstructed by AC Ventures, Pandu discussed with host Leighton Cosseboom the challenges of operating a used car dealership and the financial and technical solutions to overcome them.
In Indonesia, the market primarily consists of individual operators or family-owned small businesses (think someone with a few cars for sale in their home driveway). Broom received a boost in the market from the entry of financing companies and the development of online platforms. However, today the startup’s objective goes beyond furnishing dealers with an extra sales channel. Pandu underscored that his company aims to support dealers at every stage via its platform by providing market-relevant data, including information on the availability of cars and spare parts.
“We designed our platform to serve as a tech solution for the various challenges faced by used car dealers in Indonesia,” said Pandu. He explained that, on average, it takes one to four weeks to sell a car, although this timeline can extend to several months for more expensive models. To help dealers sell faster, Broom offers them the opportunity to upload their inventory to the platform, and the company will assist in selling it at no charge.
Through this approach, the startup has built an extensive database containing aggregated inventory. This not only helps dealers sell their cars but also enables them to find vehicles they are interested in.
Unlike more mature markets such as India, China, or the US, dealers in Indonesia typically have five to six cars in their inventories. Consequently, if a customer requests a specific model, the dealer may need to actively search for it, and this is where Broom’s database comes into play. Pandu added that users appreciate that they can see other dealers’ inventories and buy from companies they trust.
In Indonesia, a common challenge for car dealers is securing working capital. According to Broom, it is common for small dealers to invest in buying cars up to a point where they have no cash left, and then they must wait until they make a sale. However, they often cannot predict when that sale will happen.
Broom provides financing to used car dealers using their existing inventory as collateral. However, unlike traditional lenders, when the due date arrives, instead of sending borrowers reminders, Broom seeks to offer potential buyers – albeit at a slightly discounted rate.
“We’re actually telling them that they don’t need to repay our loan, but there are three or four dealers interested in purchasing their inventory through us,” he explained.
Pandu emphasized that Broom aims to offer flexible terms and has no interest in taking vehicles as collateral. “Our inventory should turn over quickly, so we don’t need to take it. Secondly, we don’t want to because if we take it, we’re essentially tying up a significant portion of their working capital,” he said. In addition, Broom offers dealers the opportunity to generate extra income by selling its partners’ financial products, such as leasing or insurance.
A partner, not a competitor
Speaking of future plans, Pandu revealed that building Broom’s own inventory is not on the agenda because his priority right now is to act as a true partner for dealers. “We don’t want to compete with them. Our goal is to empower them with technology and provide access to working capital so they can sustain their businesses,” he said.
In Indonesia, having access to transportation is crucial for city living, and public transport infrastructure is often underdeveloped. Buying a car is a commitment, which is why used car dealer networks are better established in major cities. Pandu noted that out of the 1.1 million new cars sold last year, 50% to 60% were concentrated on Java Island. However, he emphasized that used car dealerships in other parts of the country should not be excluded.