We make it easier to sell cars’, Co-founder and CEO, CarFirst

Raja Murad Khan is the Co-founder and CEO of CarFirst, which is a first of its kind, used car, online auction platform in Pakistan. In June 2016, Murad founded CarFirst with two employees, and now the company is held by the Frontier Car Group (Delaware LLC).

 Previously, Murad was the Managing Director at one of Rocket Internet’s venture in South Asia. Murad has also been a part of a private education network where he rolled out a nationwide network of schools where he incorporated modern day educational technology tools. He is a graduate of the Institute of Business Administration in Karachi and previously studied at Aitchison College, Lahore.

CarFirst is transforming the way used-cars are traded in Pakistan. It has a unique online system backed up by a nationwide network of inspection centres, which make it hassle free for sellers to sell their cars. BR Research met with Mr. Murad to discuss what makes CarFirst unique. Following are the edited excerpts of the meeting.

BR Research: How did you come up with the idea? How was CarFirst manifested?

Raja Murad Khan: I have worked in classifieds for a long time, and I am a bit of a car enthusiast as well. I also started noticing that the world is moving at a quicker pace than before; it is moving towards a more curated model where companies vet, check and place products and services online in almost all fields today.

This curiosity led us to study this model that has been doing pretty well in some of the other countries. I started wondering how we could localize this model. And together with a couple of my friends, we decided to plan it out and run a pilot project in Lahore in late 2016 to see how it works. The results were pretty satisfying, and hence we decided to scale it; we then quickly moved into other cities like Karachi and Islamabad. We are now planning to move into tier two cities as well. We should be present in three to four more cities in the next couple of months.

BRR: Could you please explain your model? And how is it unique?

RMK: Our model is based on actually making it easier to sells cars, and for other people to buy. To do that, we play a part in the transaction: We’ve got inspections centres across the country where people bring their cars; we check them; vet them; our team of market and technical experts guide potential sellers on the current market value of their car and make an offer to buy accordingly; we negotiate and if the offer is accepted, we put the vehicle on auction. For this, we’ve got an online auction portal where we’ve got a bunch of strategic partners that include a curated list of companies and individuals who start bidding as soon as a car is available for sale; it’s pretty much a live auction. So in short, we are an online auction portal.

We don’t have competitors in the market; our model is our distinctiveness. CarFirst uses an internally developed algorithm, market intelligence, and a professionally trained team to conduct inspections and valuations. Our technology development is done by our company operated office in Berlin, Germany.

BRR: You claim to that you offer quick process starting from inspection to selling used cars in just under an hour. How would you explain that?

RMK: To set the record straight, we make an ‘offer to buy’ in an hour, which includes inspection, consultation and a base price offer.  The downside in Pakistan is that it takes a fair amount of time to check with authorities for paperwork, documentation, tax issue and any sort of criminal proceedings. Precisely, the government works shorter hours; so if the car comes for inspection after their working hours, it gets into inspection the next day.

BRR: When do you put the car on your auction portal? And what kind of spreads are you making?

RMK: If everything goes smoothly and the customer agrees to the offer, we pay right there and then, and collect the car. We actually start the auction process at the time we negotiated to buy the car, i.e. when we give the deposit for the car. We work on extremely thin margins, and they vary from car to car. This model has been taken well by the market, and I would say that we see our margins improving as we scale up.

BRR: How long have you been operational? Tell us about your firm’s capital structure.

RMK: CarFirst is a home grown venture. Realistically, I started in September 2016 where we were getting more structured and formalized. We formally started in December 2016; that’s when our website was also launched.

I have two other partners. We started with the seed capital and we recently got our Series A funding - a company’s first significant round of venture capital financing. So, since inception, CarFirst has successfully secured two of the largest rounds of early stage funding rounds for Pakistan from Balderton Capital and New Enterprise Associates, Inc. (NEA), EchoVC, and TPG Growth.

Frontier Car Group (Delaware LLC) that holds CarFirst, also holds similar ventures in other Frontier Markets (Mexico, Nigeria, Indonesia and Turkey). CarFirst’s investor Balderton Capital is a UK-based venture capital firm that invests early-stage, in technology and Internet startup companies.

BRR: Are you looking for another round of funding?

RMK: No, I think we are sorted for the next year and a half. I believe that within this round, we can achieve some sort of breakeven at the operational level. My target for that is mid-2018.

BRR: What is your total workforce? How many inspection centres do you have right now?

RMK: We are in excess of 90 people in total, with 30 plus at the head office. We have 10 inspection centres that are operation in three key cities: 4 in Karachi, 4 in Lahore, and 2 in Islamabad. We are hoping to go up a few more within Ramzan and be around 20 by the year end.  We also have two warehouses; one in Lahore and one in Karachi. We actually remove the vehicle from our inspection centre and move it to our well-managed warehouses as soon as we buy it. We have around three people at each centre, two who inspect, and one centre manager who deals with the customer, negotiates, does the quality checks etc. Our first flagship inspection centre is at PSO Cavalry Ground, Lahore.

BRR: How do you put a price on a car?

RMK: It’s a lot more intricate the way the prices are handles. We have done a fair amount of research - both formal and informal - on how pricing is done in the market. With classifieds, we believe that well over 80 percent of the people who actually came back are dealerships. While consumer to consumer price is the actual aim, a very few deals happen at that rate in the market. So, I would say a genuine buyer is using a dealer. That is why we have dealers as our key buyers. Why so? The key reason is security and safety; people want everything to be checked, verified by professional before they actually buy a vehicle

BRR: How many transactions on average are you dealing with right now? How may do you need to breakeven?

RMK: It’s an unpredictable market, but I can tell you that last month we did over a 100 trades (buying and selling), and we are increasing the number of transactions pretty rapidly. I think we need about 600 trades a month to breakeven operationally.

BRR: Do you plan to move onto catering individual buyers anytime in the future?

RMK: We do think of it at times, but right now our goal is to do what we are doing and take it to a pretty large scale i.e. nationwide. And one of our key metrics is swift transaction; we want to be able to conduct our transactions very quickly, and selling to individual buyers can compromise that swiftness.