By, Jeffrey Ong, CEO of myTukar
The used car marketplace, like most other industries globally, was severely impacted as a result of the ongoing COVID-19 pandemic. Although it shook the world to its core, the numerous movement control orders, lockdown restrictions and social distancing measures have accelerated the pace of digitalisation by a number of years, directly and significantly transforming industries including the used car marketplace.
New Life for the Used Car Market
According to reports by Mckinsey & Company (2021), overall mobility is picking up steadily, although not to pre-COVID-19 levels. With economies returning to some semblance of normality, consumers’ purchase intent are getting more robust, driven by the pent-up demand for vehicles. Combined, these two factors spell a potential resurgence for the auto market, especially in the used cars segment.
In terms of the overall market here in Malaysia, I would say it is still highly unorganised. This is because car owners still find it difficult to sell a car and the market value for a used car is not transparent enough, leading to significant variance in pricing.
In terms of market growth, the country’s used car market in Malaysia is definitely a lot more mature than other countries in the region. However, if you were to zero in specifically on the growth aspect, we still have some catching up to do with more developed markets in the west, where for every two units of a used vehicle sold, one new car is delivered. Malaysia’s used car scene is the exact opposite with the sale of new cars still outpacing that of used cars. Currently, the total industry volume for used cars stands at about 400,000 units.
This is because in developed markets, the used car sector is relatively more transparent, making purchasing an easier and more trustable process. Consumers are more informed regarding the depreciation value of new vehicles, making used vehicles and their lower depreciation rates more appealing, and the quality reliability of used cars is more controlled. This ensures greater consumer confidence which leads to increased purchases within the used car market.
But with apps like myTukar that offer a more consolidated and transparent ecosystem, it looks like these pain points could soon be a thing of the past. As such, I believe in the post pandemic future, we are set to see the used car market growing exponentially and with the potential to even outpace the growth of the new car segment. We can attest to this as within myTukar we have witnessed a rapid rise in business, by 50% month on month.
A few factors are fueling this growth. Firstly, it is the shortage of microchips for new cars. It is a big crisis globally involving tiny components. When the world shut down due to the COVID-19 pandemic, it brought about the closure of numerous factories. As reported by the Harvard Business Review (2021), after this period automakers that were slow to order more chips or semiconductors lost out to electronic manufacturers. As a result, supply shifted to meet the rising demand for consumer electronics, and the backlog began to grow. When the auto industry began to slowly open back up, the stronger-than-expected demand for new vehicles outpaced production, and has yet to catch up. As new vehicles require a plethora of microchips to control a majority of functions, consumers looking for new cars will now have to consider other options.
With trusted online car marketplaces out there today implementing multiple inspection rounds, providing transparent condition reports, quality assurance and reliable warranties, more people are comfortable with and accepting of the idea of owning a used car.
Transforming the Used Car Market
In the post-pandemic future, there is a new set of problems spurred on by the COVID-19 pandemic. With many aspects of the automobile industry going digital, it is imperative that used car dealers adapt and make the necessary changes as well. Those that do not adopt these new opportunities or transition fast enough into the digital space stand to lose valuable growth opportunities. On top of the availability of multiple digital channels to compare quality and prices, customers are also now demanding for transparency, competitive pricing, and an integrated used car infrastructure that includes after sales service, warranties and more.
As the digital market expands, we foresee a great demand for cross border transactions in the future. Customers would require a financially inclusive used car financing system that rides on AI-driven lending metrics to facilitate this. In order to future-proof the market for dealers and customers, we are in the process of building such a system to make it more appealing to purchase used vehicles from anywhere in the region.
With increasing demand, inventory management will become an increasingly crucial aspect for used car dealers. Towards this end, offline infrastructures, centralised inventory management and logistics systems will need to be upgraded, something that we at myTukar have invested heavily in, to make the digital purchasing process of used cars hassle-free. Other factors that will be important in meeting these new age challenges and consequently aspects that we have been paying close attention to include transparent information about vehicles to ensure a seamless financing processes, and efficient vehicle delivery methods.
In anticipation of more demand, we are also providing in-house financial services, and a full-proof warranty programme. These are important steps towards ensuring customers enjoy their purchasing experience hassle-free.
I personally believe that reliability is the key to vehicle purchases. Most customers are just looking to move from point A to point B, via a new or used car. There is a car for every person. The trick is to deliver the right vehicle to the right person. However, if the vehicle is in poor condition and there is a lack of transparency, it is unlikely to sell well. Used car demand is sure to go up once customers start to have more visibility on the condition of the vehicle. Used car dealers today are using classified platforms like myTukar to better engage with customers.
In recent years, more and more original equipment manufacturers (OEMs) are venturing into the used car market. This is something that is to be expected, as the new car margin becomes compressed, they would need a strong used car business to support their franchises and dealers, and strengthen their customer retention. It is already taking place in the more developed countries.
In order to ensure we move forward seamlessly in the future, together with used car dealers, we are in the midst of ensuring the myTukar platform provides a holistic user experience, from end-to-end covering all aspects of car ownership. Through our services, we want the general perception about used cars to change for the better and for Malaysians to perceive these vehicles as the more reliable and affordable alternative.
