Interesting consumer friendly trends are emerging in Pakistan’s automobile industry. For one, there is growing realisation that the automobile economy cannot be fuelled by rent-seeking any longer. Ergo, the liberalization policy, admittedly far from being ideal, has already jump started. For another, new players have entered the market (think FAW) or have expressed interest of entering the market (think Volkswagen, Renault).
In the old or used car segment, Indus Motors Company (IMC) has just launched its certified used car program called T-Sure, whereas Pakistan Suzuki Motor Company (PSMC) has already had a used car scheme for roughly two years. Both firms offer used cars under different warranty periods, which is a boon for consumers.
Another interesting trend is the growth of auto e-commerce. According to a recent research by Carmudi, one of the leading online vehicle platforms in Pakistan, there was a 37 percent increase in internet usage by Pakistani customers in their search for new as well as used cars.
This is in line with global trends, where a 2013 McKinsey report on Automotive Retail Innovation cited by Carmudi states that auto dealers are no longer the primary source of information, especially for consumers between the age of 18 and 34. “Up to 90 percent of consumers in this group use a mix of OEM and dealer sites, forums, blogs, and social media to gather information and compare prices and offers before making their final decision.”
Even Pakistani car dealers have begun to transition to the digital space to reach potential buyers. According to Carmudi’s study; 25 percent of dealers reported using websites to reach potential buyers, and 16.7 percent are actively using Facebook in their hot pursuit of cars.
Hoping that these trends would continue for the better and to the advantage of consumers in Pakistan, here are two ideas on the table to further consumer facilitation – though readers should like to keep in mind James March’s famous quote that explicit pursuit of relevance constrains the free flow of ideas.
Idea 1: Certified used cars scheme should not only be offered by big boys such as IMC or PSMC. There are a considerable number of renowned auto repair workshops in Pakistan’s major cities – some of them even formally registered as AoPs or sole proprietorships – who should explore this line of business.
Used car dealers or even online vehicle platforms should consider tying up with major auto repair workshops, and work out a business model that helps both these platform providers, repair workshops as well as consumers. Because at the end of the day the consumer wants peace of mind, and a formal used car industry that provides a certain warranty would do just that.
The same – and also IMC’s and PSMC’s used car windows for that matter – should also provide auto valuation services in consumer-to-consumer transactions for which they can charge a nominal fee.
Idea 2: Speaking of valuation, it’s about time that online vehicle platforms such as Pakwheels or Carmudi should develop some kind of auto price index that tracks the price of used cars based on offer price or deal price of different cars. Understandably, the underlying factors that determine the price of used cars may be many; mileage, model, condition, registration city etcetera. But must we distrust the power of algorithms?
When BR Research pitched this idea to Raja Murad Khan, the MD of Carmudi in Pakistan, he said: “this is where the market will eventually go in six months or a year’s time.” If not that then at least some kind of quarterly or six-monthly statistical periodical that tracks the trends of used-car prices in the country. Any takers?