South Korean car-sharing platform SOCAR is planning to expand in the East Malaysian state of Sabah, according to its Malaysian CEO Leon Foong.
Founded in 2012 in South Korea’s Jeju Island, the startup chose Malaysia as its first overseas market for expansion in January 2018 and appointed former general manager of Uber Malaysia to lead its Malaysian operations. It currently operates in three major cities in Peninsular Malaysia – Klang Valley, Johor and Penang.
SOCAR Malaysia is 60 per cent-owned by SK Holdings, a vehicle of South Korean energy and telco conglomerate SK Group, while the rest is owned by SOCAR Korea.
“I love Kota Kinabalu, but every time you get there, it’s a commonly known fact that it’s not easy to get a taxi. And you might need a 4×4/four-wheel drive or a bigger car to get around Sabah. So naturally it’s a very attractive market that we’d like to expand to,” he told DealStreetAsia on the sidelines of Wild Digital SEA 2019 in Kuala Lumpur.
The South Korean car-sharing startup recently made headlines when its raised around $44 million in a SoftBank Ventures-backed round this January.
Of all the markets, why Malaysia?
Foong explained that it all boils down to “very attractive” macroeconomic factors and demographics in Malaysia.
He laid out that in Malaysia, a much as 93 per cent of households own a car, which means that at least one person in every household owns a driver’s licence. Besides, the high smartphone penetration rate in Klang Valley enables SOCAR Malaysia – a mobile app-based platform – to tap into the large user base.
“Not only does Malaysia have a good road and driving infrastructure, it has also just launched the Mass Rapid Transit (MRT) system. So, in any city that is very vast and spread out and has a newly launched transit system, people will start looking for options to complement the new transit system,” said Foong. “This is why SOCAR identified Malaysia as a great starting point, because there’s a lot of fundamental pent-up demand. Also, we can work with local car manufacturers to offer really attractive packages to our customers.”
From ride-hailing to car-sharing
The car-sharing model empowers “multi-flexers” to optimise their modes of travelling by interchanging between various transportation options – train, ride-hailing or even car-sharing – all without owning a car.
“We want to empower you to be able to drive a car without owning it but at the same time, having you feel as if you’re a car owner,” said Foong.
One of the key learnings from his stint with Uber Malaysia is that efficiency is the key to everything.
“But we also realised that there a trade-off between efficiency and growth. When we were running Uber, Grab was really good at subsidising the market and creating a certain perception that Grab is really cheap.”
Like Uber, SOCAR Malaysia also is constantly experimenting with pricing, car models and other aspects in order to find out users’ consumption patterns.
“What we learnt from competing with Grab is that how do we create a perception that your product is actually very affordable. Hence at SOCAR, we constantly have different promos that really allows you to get more value from our product,” he said.
Fending off competition
Although the concept of car-sharing is still a relatively new phenomenon in Malaysia, there are a plethora of startups that are already catering to this burgeoning market. These include prominent names such as GoCar, Kwikcar and Moovby in addition to traditional car rental service providers.
However, this doesn’t bother SOCAR Malaysia.
“We’re competition aware but we’re not competition-focused. What we want to focus on is improving our service. Despite other players in town, we’re the only one that offers a door-to-door service. And we don’t stop there. We want to offer new services so we will look at new business verticals and also launching in new cities,” said Foong.
The South Korean car-sharing startup boasts of a fleet of 1,600 cars in more than 800 locations across three major cities in Peninsular Malaysia. It has over 350,000 registered members on its SOCAR Malaysia’s platform.
“Starbucks is an inspiration to us – they’re everywhere. Fact – they have 260 locations across Malaysia and we have more than 800. We’re cheaper and faster with the use of technology,” said Foong.
The company will soon be looking at mid-term or short-term rentals – to cater to a whole new segment – where people could rent cars for up to 30 days.
Despite the rise of banking options, Foong says many Malaysians are still not using credit/debit cards. Hence, SOCAR has partnered with GrabPay to enable customers to pay via the e-wallet.
“We’re the only car-sharing platform in Malaysia that allows our customers to pay using GrabPay, so it’s all in the ecosystem – you use GrabPay to pay for your Grab rides and then you can use it to rent a car with us,” said Foong.
A natural partner to e-hailing
Ride-hailing has proven to be a large success in Malaysia ever since Uber and Grab launched their services in the market as consumers are always on the lookout for last-mile transportation services.
However, the Malaysian e-hailing industry is currently having a bumpy ride as the government has set to regulate the sector.
“We see that there are some transitional issues on the new e-hailing regulations but it’s good for our business because we have a solution that meets the needs of e-hailing drivers and our cars have passed all the inspections and are fully regulated by APAD (the Land Public Transport Agency),” says Foong.
The opportunity, says Foong, is immense for the car-sharing sector.
“All e-hailing drivers are our customers. So, it’s back to helping our customers to win, and now we want to help e-hailing drivers to win. They can use our cars and not suffer an income loss,” he said.