Covid-19 changing consumers’ need for cars

CONSUMERS today are changing the ways they buy cars, shifting towards used cars or even not needing cars at all, as the Covid-19 pandemic hampers the public’s mobility.

As businesses encourage employees to work from home, or implement flexible office schedules by way of hybrid working, workers today find themselves not needing to commute to work as often as before.

The automotive and mobility industries have certainly been among the hardest hit during the Covid-19 pandemic. In mid-August, the Malaysian Automotive Association (MAA) revealed that domestic automotive dealers lost more than RM14 billion in June and July alone.

 

MAA president Datuk Aishah Ahmad (picture) said its members, which constitute about 1,300 dealers nationwide, had also lost much in revenue from exports of vehicles and components as well as sales of spare parts locally.

“All in all, these losses had been very substantial and unprecedented,” Aishah said in a statement. To note, automotive players had to temporarily suspend their motor vehicles production plants, distributions centres and sales centres from June 1, 2021.

Meanwhile, the auto sector only registered 1,921 and 7,086 units in sales for June and July, respectively, according to figures from the national industry body. These numbers were a stark contrast to typical monthly sales between 45,000 to 50,000 units.

MAA noted sales in July mainly came from Sabah and Sarawak where showrooms are allowed to operate under Phase 2 of the National Recovery Plan (NRP) and very minimal sales via online registration.

Likewise, automotive production recorded in June and July were only 276 and 2,775 units respectively, compared to an average total production of between 40,000 to 50,000 units per month.

“The industry cannot sustain itself if the shutdown is prolonged. Many of us are bleeding,” she affirmed. “We have used up much of our savings over the past one year. It is a huge relief that finally we are allowed to resume our businesses and to revive our industry.”

The government recently announced 11 activities allowed to reopen under NRP Phase 1, including car wash centres, car accessory shops, car sales and distribution centres.

“On behalf of all MAA members, we thank the government, especially the Ministry of International Trade and Industry for allowing the automotive sector to operate,” Aishah said.

Shifting towards used car market

THE pandemic has caused a shortage of new cars as assembly plants and sales showrooms were shut down for periods of time. This led to robustness in the used car market.

Business is brisk in this subsector as as consumers prefer to drive their own cars during the Coivd-19 pandemic and buy used vehicles to save money in the uncertain economic climate.

According to online used car trading platform myTukar Sdn Bhd (myTukar) chief executive officer Jeffrey Ong, the used car industry is very much driven by the end consumer’s demand, where businesses will need to keep up with this demand and innovate further to provide better value for the consumers of used cars.

“Not too far into the future, what we will see is that there will be an increase in used car market share compared to new cars,” he told BizHive in an exclusive interview.

“What is bound to happen is you can see in other mature markets on the other side of the world, used cars consist of a 2:1 ratio compared to new cars.

“One of the key drivers for such change will be digitalisation, access to quality used cars, as well as reliable and transparent information of the vehicle conditions.”

Ong thus called on car dealers to go digital in this day and age.

“Going online and digital eliminates the geographical boundaries traditional businesses have,” he added. “Also, working with the right partner for purchasing and financing is important, as it is crucial to place trust in a partner that has everyone’s interest in mind.

“Sometimes, when something is too good to be true, it is.”

myTukar has plans to structurally enhance the used car industry by empowering end consumers that are buying used cars through better transparency of vehicle historical information and accurate vehicle conditions – giving buyers peace-of-mind when purchasing a used car, anywhere and everywhere.

“We are also investing to create a strong used car infrastructure to make quality and affordable used cars available for everyone in every corner of Malaysia as long as you have an internet connection,” Ong explained.

He detailled the process of buying a used car through its portal: “We have more than 500 cars listed on our bidding platform daily and they can just pick and choose the cars they want like buying a grocery – it’s super easy.

“Once they’ve purchased the car, we then deliver the car right to their showroom within days after the purchase. No different than buying a shirt online.

“With us, traditional used car dealers have already digitised their procurement side of the business. In turn, they are able to grow their business and they now have access to nationwide supply with us.”

Touching on myTukar’s methods to help dealers grow the used car industry, Ong said it was a two-pronged approach.

“The first would be to ensure that our dealers have a steady supply of used cars for them to run their businesses and the second is to ensure that our dealers are financially capable of growing their business.

“With regards to financing, we are the only used car platform and used car financier that has kick-started financing in East Malaysia as we recognize the importance of supporting our customers regardless of where they are geographically.

“Our AI-driven matrix enables us to help the dealers mainly through the credit approval process. With our AI-engine, we place higher weightage on live-data on their business conditions through their purchasing and payment behaviours rather than looking at past data from financial reporting.

“Note that a lot of dealers are sole prop companies and may not have complete or strong financial reporting – even if they’re running a strong and profitable used car business.”

 

Mudah.my partners MUV for better used car quality

Mudah.my, Malaysia’s largest marketplace and MUV, a pioneer of ‘Offline2Online’ and Malaysia’s first end-to-end vehicle bidding platform, have partnered to create the largest selection of inspected and used cars with warranty in Malaysia.

Through this strategic alliance, Mudah.my introduces the Mudah Vehicle Inspection & Protection (mVIP) program, which aims to give used car buyers assurance and a peace of mind for their vehicle purchase by removing any uncertainty and doubt with three assurances.

The first is by verifying the car registration and ownership details; the second is by verifying the true condition of the car via a comprehensive inspection process; and the third is to offer the opportunity for buyers to purchase an extended warranty to protect against future repair costs.

Mudah.my and MUV said they believe in the use of technology to make selling and buying used cars easy and transparent.

Mudah.my currently has over 7.5 million monthly unique visitors and over 60,000 cars for sale. With the addition of MUV’s network of trained inspectors to generate online reports, Mudah.my’s mVIP will be able to bring Malaysians the largest selection of used cars that have been inspected with warranty in Malaysia.

“Understanding the true condition of a used car has been the biggest problem for buyers and sellers.

“By introducing mVIP, we are creating a transparent and trusted car marketplace by providing an unbiased report on the true condition of the vehicle being bought.

“For even greater peace of mind, we are also able to offer Extended Warranty on the inspected vehicles through the mVIP program,” said Mudah.my’s chief executive officer Gaurav Bhasin.

Meanwhile, MUV’s CEO, Andy Teh, said the company is very excited to be working with Mudah.my through this strategic alliance and to provide them with its expertise in used vehicle inspections through its nationwide network of inspection centres and hubs.

“If the seller is not able to come to our centres for the inspection, we are also able to send our team to their doorstep to make the process of buying and selling their used vehicles as convenient as possible,” he said.

“MUV’s comprehensive 180-point inspection report of vehicles has been relied upon for over RM1.2 billion worth of vehicle transactions on MUV’s online bidding platform.

“The reports are widely accepted as the gold standard used by dealers throughout the country to help them trade used vehicles without being physically present to look at the vehicles beforehand,” he added.

 

Carsome reaches US$1.3 bln valuation in funding round

Carsome Group, an online platform for buying and selling used cars, said on Wednesday that it had become Malaysia’s largest tech unicorn after a US$170 million funding round boosted its valuation to US$1.3 billion.

Investors in the latest round included billionaire Tsai Ming-kai’s semiconductor maker MediaTek, tycoon Patrick Grove’s investment company Catcha Group and Malaysian government fund Penjana Kapital, among others. Carsome said one of the largest sovereign wealth funds in the region also joined the round, without disclosing its name.

The company also secured new credit facilities of US$30 million. The financing round, which Carsome said was its largest-ever equity investment, will be used to expand the firm’s retail and auto-financing businesses. Carsome said the fresh capital would boost its capabilities in strategic investments, as well as mergers and acquisitions. The used car platform partnered with Catcha Group last month to acquire Australia-listed rival iCar Asia in a US$200 million deal. The combined company is aiming to reach US$1 billion in revenue and 100,000 vehicles in annual transactions, according to Carsome.

“We are deeply honored and encouraged by the confidence and support accorded by our investors,” Carsome’s CEO Eric Cheng said in a statement.

“We are geared up to achieve even greater heights while rolling out Southeast Asia’s integrated car e-commerce platform, now further solidified by various strengths within the ecosystem.”

Carsome was established in 2015 as a vehicle comparison site. Since then, it has transformed itself into a pre-owned car trading platform with operations in Malaysia, Indonesia, Thailand and Singapore.The firm has attracted investments from the likes of Gobi Partners, Asia Partners, Mitsubishi UFJ Financial Group and others. Carsome has said that it plans to go public, possibly within the next 12 months.

The latest funding round highlights the intensifying competition in Southeast Asia’s online used car market as the pandemic continues to drive consumer preferences toward safer and more affordable transportation options.

Eye on Sarawak’s used car markets

WITHIN Sarawak, the used car industry is one that is ever growing. With its vast roads and major infrastructure projects such as the Pan Borneo Highway, these remain a boon for the second-hand automotive market.

Earlier this year, myTukar established two inspection hubs located at Kuching, Sarawak and Kota Kinabalu, Sabah, concurrent with its aim to expand its footprint into East Malaysia.

When asked for his thoughts on the East Malaysian used car market, myTukar’s Ong labelled it as “interesting”.

This is because from a business operations perspective, myTukar sees that West Malaysia is a huge source of used cars that is supplied to the East Malaysian market.

“The reason is because West Malaysia is primarily driven by the new car market and a good portion of used cars will be remarketed to East Malaysia used car dealers and end consumers,” Ong observed.

A local used car dealer, Superior Motors Sdn Bhd (Superior Motors) owned by businessman Abdalla Salim, was thankful of the digital presence of myTukar aiding used car dealerships in Sarawak.

“Our company was incorporated in 2015 formerly known as Superior Heritage Sdn Bhd. At the moment our company has two showrooms in Kuching, the first of which is our main showroom along Jalan Batu Kawa while the second branch is located at Tabuan Tranquility.

“Today, we have managed to stock more than 120 units and our goal is to achieve 200 units in stock by the end of 2022,” he told BizHive.

“Like all other industries, the automotive industry has struggled during the pandemic with lockdowns and the changes in financial capabilities of our customers, ultimately affecting our sales,” he commented.

“It is true that digitalization is the future of all businesses. At the moment, used car dealers at large do enjoy the much simpler process of transferring car ownership without physically having to go to a Road Transport Department branch.

“This has saved us a lot of time and manpower which we are grateful for as we hope to see continuous innovations to take this industry to the digital era.”

Being a new player in the industry, Abdalla found it very difficult to keep the momentum going to sustain used car sales during these trying times. He noted that even with social media marketing and e-commerce solutions, customers find it difficult to purchase used cars online.

“Customers still highly prefer the old fashioned way of purchasing in person and with the restrictions in place, it has made sustaining our business a real challenge, to the point where our sales have declined by more than 50 per cent,” he added.

“The other struggle is the high risk of depreciation and maintenance to which used cars are very vulnerable.”

This was where myTukar was of big help to him.

“myTukar has helped our company a lot in terms of easing our supply problems. Before this, our company depended solely on bank repurchase agreements (repo) vehicles,” Abdalla explained.

“This was conducted once a month and the condition of the vehicles were really bad which caused us to waste a lot of time on repairs and body works.

“Since we partnered with myTukar, we have managed to save a lot of time in terms of repairs and body works and we are able to purchase cars every day with no issues.”

In order for a business to grow fast – especially in an asset-heavy industry such as cars – Abdalla said it was crucial for them to ensure that their products are always available and ready for sale in a short time.

“Before our partnership with myTukar, we really struggled with this, as we would spend months to repair the repossessed vehicles and also weeks to transfer ownership from previous owners to banks then our company name which contributed to extremely slow growth.”

myTukar has also helped Superior Motors in terms of turnover as at the moment, they are able to convert its sales to stock and vice versa quicker than before.

“Furthermore, myTukar has empowered our company to challenge the market with competitive prices and a larger variety of models or brands than before as we were unable to find more brands at an affordable price prior to this partnership,” he added.

“Since collaborating with myTukar, we have been able to expand our stock and also our branches at a higher pace than we could ever imagine, which has put our company in a better position to compete in the market.”

Moving forward, Abdallah hoped that the financial institutions will try to ease up on the scoring/credit requirements so that they are able to serve more customers, driving its sales up as well.

“As the used car business does contribute a lot in terms of the country’s economy, we hope that all parties see the urgency in supporting it With the pandemic hopefully coming to an end soon, my thought is that the government will find ways for the used car industry to recover in the months to come.

“Our major problem is the pandemic which at the moment the whole country is struggling with. I believe we have to work together so that we can move towards full immunisation of the population.

“After this is achieved and lockdowns are lifted, I really believe that the market will find itself gradually improving.”