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Driving disruption in the car business
EXPERIENCED car owners know this: Buying a car is easy, but selling it is hard. That's especially so if you want top dollar for your old wheels, since that involves letting canny used car dealers or worse, random members of the public come and poke around.
But along with so much else in the car industry, that process is getting a digital makeover.
Digital auctions are a relatively new way of trading your wheels for cash here. When Lai Yu Wei wanted to sell his four-year-old Kia Cerato K3 recently, his friend suggested a new system on local car portal UCars.sg. There, the 32-year-old warehouse supervisor clicked on Sell My Car, keyed in details about his Kia, and sat back. 48 hours later he received a firm offer. "I'd thought I'd give it a try as it seemed pretty straightforward to use," Mr Lai says.
In that, Ucars seems to have achieved its aims at least: "We developed Sell My Car as a seamless platform for users to buy and sell cars with ease," says Ely Wong, the business development manager for UCars.
What Mr Lai might not have realised was that behind the scenes, 240 used car dealers were engaged in a bidding war for his car.
After Mr Lai posted his car's information on the platform on a Thursday, UCars sent it out to its network of used dealers. By Saturday, he received an offer which he found reasonable, and following a meet up with the dealer for a test drive, he "accepted the offer right away".
Ucars' system isn't the only used car bidding system here, but the start-up says it offers one key benefit: It only charges dealers a flat fee of S$88 for every successful transaction.
Ms Wong says rivals usually charge buyers and sellers a fee, but also charge buyers a commission. That depresses prices because it draws fewer dealers to each auction, and discourages strong bids. "Say your car is worth roughly S$100,000. If a dealer has to pay a 2 per cent commission, he would actually have to bid S$102,000 because the auction service pockets the commission," Ms Wong says. "With our flat fee he could actually afford to bid, say, S$101,000 and you would both be better off."
Mr Lai's experience bore this out. He says the bid for his Kia from Ucars was S$600 higher than an offer from another service.
But while Ucars was partly set up to disrupt the used car auction game here, the ongoing Covid-19 pandemic has suddenly increased its relevance, like it has for so many digital services.
For one thing, disposing of a car like this minimises human contact because most of the process is handled online. Also, Ucars says that as a dealmaker, it's in a position to encourage social distancing and put safe practices in place.
"We ensure that all safety measures are adhered to, such as requiring all parties to wear face masks, and helping to sanitise the seller's car before it is presented to the buyer", Ms Wong says.
In that respect, online bidding is just one area of the car business that is changing. On the new car side of things, several dealerships here have launched virtual showrooms to recreate the experience of physical car shopping. Some dealers, such as those for Lexus and Porsche, have introduced a "to-your-door" test drive service.
"The Covid-19 pandemic has resulted in the digitisation of many industries," says Cho Kok Yick, UCars' chief technological officer. "The car sales trade is no exception, and we are developing new online tools as a response to that."
Mr Cho says UCars is rolling out an online car valuation tool to complement Sell My Car. It collates market data from the startup's car dealer network, then uses artificial intelligence to generate an instant, accurate valuation of a given car in real time. The idea is to "help consumers better manage their expectations when selling their cars", Mr Cho says.
While online services increase convenience, consumers need to be convinced that they aren't trading it for something else: trustworthiness. With a human ultimately at the other end of any used car transaction, honesty is still a potential concern.
Ucars says it recognises that, and sends a representative to every meet-up between seller and buyer to ensure that dealers don't renege on their offers. It also holds a S$1,000 deposit from the winning dealer that's passed on to the seller upon completion of the sale.
Mr Lai says the service simply worked. "It was a very professional setup, and the whole transaction was completed quickly and smoothly with no problems. I would definitely recommend it to my friends," he says. So much for selling cars being hard.