The number of used cars traded in Pakistan every year is only going to grow.
Mujahid Khan is the Country Manager for Vava.Cars and has been associated with the company since January 2020. He has over 16 years of experience in North America and Asia in strategy, business development & sales, greenfield projects launch, distribution, brand development, and financial management.
Prior to Vava.Cars, he was the CEO of The Aman Foundation overseeing social enterprise development and public private partnerships. Previously he was also associated with Engro Corporation. He completed his MBA from the University of Alabama and thereafter worked in private equity covering venture financing to incubate and grow technology, green energy, and bio-tech startups.
Following are the edited transcripts of a recent conversation BR Research had with Mr. Mujahid Khan:
BR Research: Tell us about Vava.cars business model and your presence globally as well as locally.
Mujahid Khan: Vava.Cars is headquartered in the UK and has set out to create a digi/physi business model for used car trading. The use of technology, and a transparent digital and physical customer journey has helped Vava.Cars design a hassle-free way to trade used cars that inspires trust.
We are present in two markets currently – Turkey and Pakistan. Turkey was our first market where we launched in the middle of 2019. We launched in Pakistan starting from Karachi in January 2020.
The business model is very simple and it’s that simplicity that actually attracts customers. The journey for the consumer with us starts online. The customers who want to sell a vehicle would put in the car details online and get an instant and free valuation of the car. This valuation is an estimate based on the parameters that the customers put into the system. Based on the valuation, they have the opportunity to book a free appointment to either come to one of the 4 purchase centers in Karachi – or they can avail our free mobile purchasing service where we come to their doorstep to inspect the car. It must be remembered that at no point during the whole process do we charge the customers because the intent is to make the selling process seamless for customers. If the customers accept the price we offer, we make an instant payment. It’s a very smooth, hassle free as well as a very transparent process and the inspection and valuation is done by our highly experienced inspection team on 120+ parameters.
BRR: How would you define competition within your segment, and what is your unique selling proposition?
MK: The overall sector is completely fragmented, unorganized and informal. Its either peer-to-peer or through traditional non-franchised dealers. People either normally use online or print classified to find buyers. However, organized players are now bringing transparency into the system where there is an inherent mistrust in both peer-to-peer transactions and through the traditional way of selling through dealers. I believe it’s good for more organized players to join the sector because it gives the consumers choice.
I also believe that differentiation comes in the minds of the consumers. We are customer obsessed and focused on creating a service that customers love – one that gives them great value for their time and their vehicle. We offer customers the security of direct transactions with us rather than a middleman or brokerage model. Our mobile purchasing service for doorstep service is a USP as no one else is providing such a service and that too free of cost. Our state-of-the-art Purchase Centers are one of a kind and designed around creating a comfortable and transparent environment for the customer – the customers vehicle actually comes inside our center where they can view their car being inspected right in from of them through a glass partition – while they enjoy free Wi-Fi and refreshments. We do not do test drives (something customers dislike) and instead use advanced tools to scan and inspect the vehicle.
BRR: How long does the whole process of selling a vehicle take at your platform?
MK: As soon as you put in your credentials and car details on our website, you get an online valuation, which gives you the ability to book an appointment either at a purchase center or have us come to your doorstep via the Mobile Purchase Units. Whether we come to you or you come to us, the process takes no more than 45 minutes. Inspection is done in 30 minutes while 10-15 minutes are taken by our purchase center manager to explain the inspection report to you and offer a price. If you agree with it, we have the ability to make an instant transfer for payment. We also offer a complementary ride back if you are leaving your car with us.
BRR: What kind of hurdles do you face while running a used car trading business in a very unorganized sector?
MK: There aren’t any hurdles per say other than just getting more and more people aware about the availability of the service. I believe people should definitely try it because it’s a free of cost service and in no way are they obligated to complete the transaction based on our inspection report, valuation and offer.
In terms of other hurdles, I would say that we only buy vehicles registered in the owner’s name, which could be a problem sometimes for people who don’t have the car in their name.
BRR: What are your plans of expanding beyond Karachi, and has covid affected these plans?
MK: Karachi is the city we decided to launch from as it is the largest stand-alone metropolitan market in Pakistan – combine that with a highly value seeking customer base and melting pot of cultures and you have a great place test your business and value proposition. We are planning to scale nationally this year. Our plan this year is to expand regionally within Sindh and moving northwards into Punjab and perhaps KP.
Last year, when the initial sustained, long term, complete lockdown happened, it had an impact on everyone including us. It had a net impact of 4-5 months in terms of the timeline for our expansion plans. However, today the auto sector is one of the top performing sectors with volumes growing month-on-month and many new players coming despite the pandemic. And I think this is also a great backdrop for digitally focused car-trading platforms because we are able to take a lot of physical labor out of trading used-cars. From the online journey to us visiting you or you coming to our purchase centers, it’s a very safe environment with all SOPs being adopted. So, I don’t see the pandemic affecting our business now – unless there are widespread and major lockdowns where we are not able to operate at all.
BRR: As an industry expert, what is your view of the used-car market in Pakistan? What is its estimated size?
MK: The used car industry in any market usually has a very direct correlation with the new cars industry. In most developed markets like US, UK, Canada as well as growth markets like Turkey, India, Pakistan, there is usually a of 4-7x ratio of used cars traded to new cars sold in any given year One of the highest production years for automobile sector in the recent past was 2018 when in Pakistan there were 250,000 new cars sold. Amid the lack of data capturing and data availability in the segment, the minimum number of used cars traded every year in Pakistan is estimated to be around one million.
And this number is only going to grow. There is another important metric - the motorization rate, which shows the number of cars per thousand people in the country. This number has gone down for Pakistan in the last one decade from around 20 to 17, which tells us that our population has grown faster than the rate of motorization in the country. This is exactly why we see all these new entrants coming into the market because this number has to go up with the increase in people, infrastructure, motorways and the lack of public transport. This is why we also see so many automobile companies investing in the country.
What does that mean for the used car industry? With motorization levels going up, the number of used cars traded will also go up exponentially and the reason for that is for every new car that is sold, it becomes a used car as soon as it is registered. The challenge for the organized players in the segment is getting people to try this new model of trading used cars and capture the opportunity that comes from the growth of the overall automobile sector.
BRR: Coming to the import of used cars, what is your view of government’s existing plan and do you think there should be a policy for used cars?
MK: There should obviously be a policy for used car imports. Why was the import policy changed? Was it changed because we wanted to give space to existing and new players to come in and start manufacturing? Or was it changed to curb forex flowing out of the country? I think it was a bit of both. There has to be a way to cater to both things without completely shutting down used car imports, because even now the policy that only allows overseas Pakistanis to bring in cars through the gift scheme gets misused. The volumes of these used cars coming in might be low, but they are still coming in by circumventing the existing rules and regulations. So why create a policy that could be abused?
The better way of doing it all is to allow used car imports by creating certain conditions around it such as imports done by only established companies that have export units or setups in the countries where these cars are coming from; or maybe allow it for makes and models that are not produced locally; or the policy could lean more towards hybrid and electric vehicles. In short, there has to be a proper import policy for used cars because if there isn’t, local manufacturers get away with whatever they want. And the local consumer deserves choice; we are always one to two generations behind on new cars models being offered in the rest of the world because there is no choice. Providing that choice will force local manufacturers to offer the Pakistani consumer the best quality car as well as the latest models.