'Our ultimate goal is to build an ecosystem for auto services ...,' CEO PakWheels.com

Mohammad Raza Saeed, the CEO of PakWheels.com, holds a Bachelor's degree from LUMS and is determined to bring Pakistan into global IT map by launching ground breaking technology products that can have global impact. PakWheels.com was formed in 2003 and has become the largest community based automobile website in Pakistan with more than 300,000 registered car and motorcycle enthusiasts. The website has around 18 Million pages viewed every month, where people search for classifieds, cars and motorcycles as well as discuss and share auto-related issues, information, pictures, videos, etc with other members.
Raza is a serial entrepreneur who has founded many successful software services & products companies that have global footprint. He started his first software services company, Confiz, from his dorm room at LUMS in his sophomore year, which has progressed to become one of the fastest growing companies in Pakistan as per fast growth 100 ranking by AllWorld published in 2012 and 2013. Confiz customer base includes Fortune 500 companies including Microsoft, Intel, PwC, etc.
Raza is actively involved in promoting entrepreneurship in Pakistan and has been instrumental in bringing world famous start-up weekend competition to Pakistan along with starting first entrepreneur meet up group in the country called ELG. His other ventures include Simplicant.com, SAAS recruitment marketing & tracking platform and Simobo, a mobile value added services company.
Following is the edited excerpt of BR Research's recent sit-down with the CEO of the country's largest online marketplace for cars.
BR Research: How did PakWheels.com come into existence?
Raza Saeed: PakWheels.com was started by Hanif Bhatti, a businessman, a dotcom entrepreneur and an automotive enthusiast in Karachi. It all started with an auto enthusiast putting up a website where you could create a page about your own car, and see what others were driving. And suddenly it became a hit with all the automotive enthusiasts gathering at the forum for discussion. The natural extension at that time was to add classified ads for selling.
In 2008, my two partners and I got involved and acquired majority shareholding of the company and got it more structured. The website has evolved from just old cars to Pakistani's number one online marketplace to buy and sell cars and bikes, read automotive reviews and news, check automotive prices and find solutions to automotive needs. PakWheels.com has won many awards including Brand of the Year, TeraData 2013, TeraData 2014 and Arabia 500 Fast growth.
BRR: How will the rising internet user base and efficiency in online marketplaces help businesses in general?
RS: Internet is a great equaliser, it democratises information. Some years ago, there was a perception that cars are cheaper in Karachi, and there was no marketplace to access and compare prices between cities. Today, with online marketplace, you have access to all the inventory in Pakistan that is for sale and you can look for your specifications online and have no qualms about buying it from any place.
Suddenly this local business of Karachi gets national, and today, a dealer is Karachi can build his brand across Pakistan. Such presence of online market places whether they are for cars or any other product bring efficiency to all businesses involved, brings competition, increases options for buyers, improves supply chains and brings down undue costs.
However, we are still way behind our neighbouring country that has more choice and competition. Compared to India where there are 28 new car manufacturers and around three million unit sales annually, Pakistan has very few new car manufacturers with 200,000 cars sold annually, which when discounted for population still does not compare well with India. India's annual advertising spend is on average INR38,000 crores, and around one percent is spent on online car advertising on auto portals and other websites by the car manufacturers.
Another distinction between Pakistani and Indian market is the business model; India is following new cars model for its auto portal, while we are in lead generation business with our stakeholders: used car dealers, new car manufacturers, banks, insurance companies, workshops, dealers, and any business connected to auto industry.
Our ultimate goal is to build an ecosystem for auto services; whether it is buying, selling and researching for cars or auxiliary services like maintenance, insurance or financing, you should be able to come to PakWheels.com. There is a lot of information and access already available on PakWheels, and we plan to make it more structured; our research and discussion forums are already very active.
BRR: How significant are revenues and profits for online marketplaces in Pakistan? What is PakWheels revenue model?
RS: For internet businesses in Pakistan, revenue is a meaningless digit as they are still in infancy. These businesses have not yet reached their potential as the internet is just taking off, and people are just beginning to believe that they can buy and sell online. Amazon, except for the last quarter, has not declared profit in its 20-year history. It is approaching almost $100 billion in sales, and Jeff Bezos keeps saying that they are building the business for the longer run.
There are other indicators that show internet businesses' penetration. We have around 240 million page views annually, 500,000 annual listing of cars, bikes, and accessories, and visit by almost 40 to 50 percent of Pakistan's internet population in 12 month period.
Right now, advertising is the main source of revenue for PakWheels. Events like static display of different categories of cars and bikes are another revenue making opportunity for us. However, the sustainability and scalability of the business in the long term depends on lead generation. Monetising individuals for listings is not something we would be looking into as it is difficult for us and barely incentivizing for them.
For businesses, we would be providing different packages, tools and services to dealers, new car manufacturers, importer and anybody we are generating leads for. For this, we first need to get that critical mass where we are clearly a leader in the entire user space.
BRR: What are your plans for the $3.5 million venture capital investment?
RS: While it is true that setting up an online business is not capital intensive, scaling requires significant amount of capital. To move onto the next level and strengthen our brand, we plan to invest in advertising and tradition ATL/BTL methods as there is a significant portion of population that we cannot target with our online advertising since they don't believe in online buying and selling.
Beside, marketing, we have to make our product offerings better. It is expected that Pakistan's internet user base will rise to 100 million by 2019, and we want to make sure that PakWheels is the first choice for anyone wanting to buy or sell their vehicle. We are also planning to work gradually on developing predictive models from our existing listing data.
BRR: Are there any proxies for second-hand car transactions?
RS: This is an interesting yet complex calculation. As per the existing data in some international publications, total number of vehicle on roads in Pakistan were seven million in 2008, and with a minimal growth rate, it comes around to 10 million vehicles in present times.
An advertising agency pitched a figure of 11 million calculated from the data available on PAAPAM's website. It is important keep in mind while calculating such numbers that around 50,000 cars were being imported two years ago. However, imports have come down drastically. Today, around 4000 cars have been imported in the last six months due to reasons like expensive Yen, increased duties, reduced car age, and expensive vehicles.
Another good proxy is to analyse annual transfer data from Punjab Motor Registration Authority, and extrapolate it to other provinces. The size of the second hand market that we could cook up using this estimation was two million vehicles exchanging hands annually under the assumption that for 10 million vehicles on the roads, a person enters into a transaction every four to five years.
BRR: What does the future hold for auto industry and its online business in Pakistan?
RS: Number of cars per household is very low in Pakistan. If three million units are sold annually in India, and India being typically about five times Pakistan's size, at least 600,000 units should sell in Pakistan. This is nowhere close to 200,000 local sales and diminishing imports right now. However, a spur in economic activity has great potential to pull the demand and bring in new car manufacturers.
One issue that the auto industry faces is a consistency in auto policy, very vital for localisation and building an ecosystem. Also, we have a very limited market, so competition is not only good for the industry but also for the buyers as they would have more choices, need for information, comparison, research and facilitation. All this will eventually help the online auto marketplaces.