Desmond Hang, Carbar CEO and co-founder

THREE-YEAR-OLD car subscription company Carbar has received a $16.8 million injection from investors including insurance giant IAG that puts it on track to expand into Western Australia and Queensland.

The shareholding, which gives IAG the biggest slice of the company, was triggered by the insurer’s plans to focus on emerging mobility trends.

This includes increased demand for flexible car subscription services and the introduction of autonomous vehicles.

Both have significant implications for the insurance industry.

IAG executive general manager of innovation James Orchard said in a statement that Carbar will play “a central role in our approach to the future of insurance and the changing mobility needs of our customers”.

“Carbar has pioneered the car subscription model in Australia. We look forward to combining its world-class digital capabilities with IAG’s assets and scale to provide new mobility experiences for customers today and in the future,” he said.

Carbar – Desmond Hang and James Orchard

Carbar said the funding will primarily be used to expand its subscription service business.

It launched in Melbourne in 2016 and opened in Sydney last month. It now plans to expand across Australia in 2020.

Carbar CEO and co-founder Desmond Hang said IAG’s support will be instrumental in growing the business.

“We’re thrilled to be working with IAG. They share our vision and are incredibly supportive of our goals and business,” Mr Hang said.

“The partnership is an integrated strategy, with multiple layers to it, primarily helping IAG’s customers’ mobility needs and improving customer value. In addition to that, the partnership will bring operational synergies such as marketing and technology support and distribution opportunities.”

Mr Hang said the injection of funds and the presence of IAG would introduce operational synergies such as marketing and technology support and distribution opportunities.

He said Carbar is pioneering a new market in Australia and faces hurdles such as car ownership being ingrained in the minds of buyers.

“We’re asking motorists to reconsider this,” he said.

“We know this will take time, and we know the benefits for consumers are there. (However) we’ve been incredibly heartened by the uptake of our offering to date.

“To this point, we’ve had people reach out from interstate and ask if they can pilot our service when it arrives.”

Founders

Mr Hang said Carbar believed that electric vehicles will be commonplace in a matter of years and that autonomous cars will soon follow.

“With all this change on the horizon, I think Australians need to detach themselves from the emotions of buying a car and look at the process very pragmatically,” he said.

“They need to ask, ‘If I buy this new car today, how much will it really be worth in a year or two’s time with all this new tech hitting the market?’

“This is already happening in my view. New car sales for combustion engine cars are down globally, and Australia isn’t immune from this trend. Earlier this year, we saw the merger of two of Australia’s largest car dealership operators as a result.

“Carbar is operating and growing around these trends, so we believe we will be well positioned to capitalise on these new markets that are emerging as a result of it.”

IAG, which includes insurance companies NRMA, SGIC, SGIO, CGU, Swann and WFI, reported an increase in gross-written premiums of 4.1 per cent in the first half of this calendar year to $5.88 billion.

But its net profit fell to $496 million, down 33.4 per cent, compared with the previous corresponding period because of unexpected natural disasters – including the hailstorms in New South Wales – and flat market conditions.

By Neil Dowling

Carbar team