By Afiq Nuradli,
Couple weeks ago, news agencies across the country reported that WapCar, a tech-driven content hub – in a survey – found over 90 percent of Malaysians concerned about taking public transportation amidst the Covid-19 health threat. These respondents say they would prefer to self-drive as a safety measure and are prudently opting to reduce spending and lower their budget for a car.
The Coronavirus which ravaged economies and businesses worldwide have put a stop to ride-sharing services and at the same time affected sentiments on public transportation in Malaysia, much like anywhere else.
Grab rides have been restricted to a maximum of two passengers at a time while public transport operator, Prasarana Malaysia Bhd saw severe disruption in services which in return affected its ridership.
Business Today speaks to Southeast Asia’s largest online used car trading platform, Carsome co-founder and Group Chief Executive Officer, Eric Cheng on the growth of his startup, his thoughts on the increased demand for personal vehicles and his takeaways from the unprecedented health crisis.
Cheng says data collected through the Carsome Consumer Survey conducted in April showed an expected 76 percent decrease in the usage of ride-sharing services among consumers as they felt safer using their own vehicles rather than sharing with strangers.
He adds that the company is confident that this trend will continue to dominate in the long run, especially under the new normal. “We are confident that there will be an increased demand for personal vehicles to maintain physical distancing and limit exposure to the virus,” he says.
“As affordability will be the primary consideration, we believe that consumers will opt for used cars over new cars as they will be dealing with lesser depreciation, more favourable hire purchase loans and lower insurance rates, among other factors,” Cheng comments.
Malaysia’s used car sector on the other end has since recorded over 100 percent growth year-on-year this year as compared to the first half of 2019. A claim supported by the Malaysia Automotive Association (MAA), MAA president Aishah Ahmad said during a press conference back in July, the Malaysian used car market is currently doing “roaring business,” and the growth has even surprised the used car dealers themselves.
Evident of the growth, the Southeast Asia’s largest online used car trading platform saw a strong V-shaped recovery since they reopened for business in early May. Cars below RM 30,000 started seeing a higher rebound in recovery from the dip due to the MCO in Malaysia.
The used car industry, an underserved market in Southeast Asia with high growth, according to Eric who says that Southeast Asia has only penetrated about 1 percent of the used market cars market, with a transaction value of US$600 million (RM2,502,773,842).
On the rise
Carsome, which was set up in Malaysia in 2015 has since seen growth on various ends and is continuing to do so. The year-on-year growth in numbers of consumers buying used cars off the platform has been going on the rise, with them currently transacting 40,000 used cars annually and this has been an impressive growth from 2018 with 10,000 cars annually and 100 cars annually in 2017.
On the C2B front, the startup offers end-to-end selling solutions for car owners, who can sell their cars to Carsome’s network of dealers via bidding, or by accepting the price quoted by its inspectors. The startup will also manage the entire selling process, offering a seamless and hassle-free experience to customers.
On the B2B segment, used car dealers are able to bid for the cars on the bidding platform. This ensures that they have access to a constant stream of inventories.
Meanwhile on the B2C front, Carsome recently launched its business-to-consumer (B2C) segment, offering a differentiated experience of buying used cars, in conjunction with the opening of its new flagship store, the Carsome Experience Center in Kuala Lumpur.
The startup is aiming to reshape and elevate the used car buying experience by introducing a highly digitalised and transparent process. Cheng shares that it is part of Carsome’s continuous effort in solving one of the used car industry’s biggest pain points – the lack of trust in buying used cars.
It is also in-line with its goal of building trust and assurance throughout the entire supply chain of the used car industry, from sourcing, financing, retailing to after-sales services.
“Our Car Purchase Preference Survey showed that 70 percent of car buyers want detailed information on car condition; 60 percent appreciates an extended warranty; and 40 percent values test drive experience and money back guarantee. Our Carsome Promise package, which is the first and the only in the market, and carefully curated Carsome Certified cars definitely offer the best value proposition for buyers,” says Cheng.
Carsome Promise consists of a one-year warranty and a five-day money back guarantee to a selection of Carsome Certified cars. All Carsome Certified cars have passed Carsome’s stringent 175-point inspection, have not been in major accidents and do not have structural or flood damage. On top of these, consumers can opt to get their cars delivered to their doorsteps, via Carsome’s Home Delivery service.
“The New Way of Buying Cars” for consumers starts with browsing of car models with detailed information and booking of test drives, all done online. Actual test drives will take place at a Carsome Experience Center, where, upon purchase confirmation, Carsome will manage the entire process for customers, ensuring a seamless and convenient online-to-offline experience.
Throughout the company’s five years of helping consumers sell their cars, the startup developed the largest transaction network, comprehensive car inspection and grading standards as well as sophisticated data intelligence in order to determine the vehicles it makes available to consumers. As a result, consumers get to enjoy a wide selection of high quality, certified used cars from a centralised inventory pool.
“With the new launch, we are now creating a new customer acquisition channel for our partner dealers to remarket and sell more cars through our extensive marketing reach. This is an exclusive, value-added service to our partner dealers, who can now list their cars on Carsome website for free,” he adds.
The startup is also planning to roll out its B2C segment regionally in the coming months. In conjunction with the new launch, the company has introduced its new brand identity, featuring a professional and institutionalised logo while retaining its organisational values and DNA.
Takeaways from an unprecedented crisis
While the startup faced challenges as a startup company during an unprecedented health crisis in Malaysia, it has also learned to overcome those challenges and in the process managed to gain a few key takeaways.
“We were already digitalising the used car industry as much as possible to consolidate a very fragmented market. The pandemic has accelerated the digitisation of the entire automotive industry,” says Cheng.
The market was fragmented because there is no system or standardisation when it comes to buying or selling used cars.
Consumers are very much on their own, from visiting multiple dealerships to managing paperwork, and all at their own risk. This fragmentation also caused a high level of distrust by consumers towards used-car dealers, Cheng shares with Business Today. This is where Carsome comes in, addressing the industry pain points by providing transparent and seamless solutions
When the lockdown measures were gradually eased in May and most working sectors were allowed to resume work, Eric shares that Carsome was able to be the first one out of the gate and achieve their V-shaped recovery.
This is done by Carsome fine-tuning its inspection app to increase productivity while ensuring the quality and performance of car inspectors, upgrading the backend infrastructure of its bidding platform, which currently sees a 50 percent increase in the number of cars supported and upskilling its workforce through accreditation as Carsome believes in investing in its people as they are one of the strongest assets.
Commenting how the new tariffs impacted consumer demand, Eric answered by saying that the performance of the used car market is generally influenced by that of the new car market, and is an indication of demand for private cars.
“The sales tax exemption for locally-assembled and imported cars under the Pelan Jana Semula Ekonomi Negara (PENJANA) will reduce the cost of car ownership. The initiative is also expected to bring more trade-in-opportunities when consumers are swapping their rides for new vehicles,” the startup co-founder says.
Carsome has plans to focus on horizontal and vertical growth and expand into more cities within Malaysia, Indonesia, Thailand and Singapore while also looking to expand its product offerings and existing services to customers and dealers including insurance, aggregation of financial products and a significantly different experience buying used cars.
The startup is currently also working towards obtaining accreditation for its car inspection standard.