Fuelled by technology

Technology and internet-based companies are accelerating the pace of disruption at an alarming rate. Google has completely disrupted the Yellow Pages business which was once valued at $60 billion and is now below one billion dollars. Airbnb, worth over $25 billion has disrupted the hotel industry by accumulating the largest inventory of rooms without owning a single property. Uber, worth over $50 billion, has completely disrupted the local travel and taxi business without owning a single car. Disruption is also changing the auto industry globally as well as in Pakistan.

Speaking globally, Tesla, the world’s first electric carmaker is disrupting many facets of the auto industry. It is the first company in the world to launch a commercial electric car that does not compromise on performance and looks. Unlike traditional cars, the functionality of Tesla cars keeps changing through software updates. For example, Tesla recently enabled the (partial) self-driving feature by simply pushing a software update over the internet; in another update they improved the mileage of their electric cars.

Tesla has also disrupted the traditional process of new car sales by ditching the dealership- based sales model in favour of direct consumer sales using the internet. Anyone can go to the Tesla website, configure their car (including paint job, seat materials and configuration, roof type, interiors, tires, mileage) and then place the order.

Although such disruption has yet to come to Pakistan’s auto industry, plenty of auto related services such as classifieds, car brokerage, dealerships and sales are quickly moving online to websites such as Apni Gari, Carmudi, OLX, PakWheels, Sasti Gari and countless others.

Smartphones with internet connectivity are deployed to solve some of the inherent problems related to the conventional auto trade. For example, buying a used car from a dealer meant several visits to find the right car or sifting through hundreds of newspaper classifieds, with limited information and no pictures. With online portals, people can sift through tens of thousands of cars listed for sale across Pakistan, look at pictures and then decide which ones they want to investigate further.

Similarly, sellers faced challenges with the traditional system because they either had to leave their car at the dealer’s for a long period of time or sell it to the dealer instantly at a price lower than the market value. With online services, they can now list their cars and wait until they find a buyer willing to offer the right price.

Plenty of auto related services such as classifieds, car brokerage, dealerships and sales are quickly moving online to websites such as Apni Gari, Carmudi, OLX, PakWheels, Sasti Gari and countless others.

According to World Bank data, there are three million cars on the road in Pakistan today. This number is increasing rapidly as more than 170,000 new cars are sold every year and about 35,000 to 40,000 cars are imported every year as well. Yet these numbers pale in comparison to other developing countries, given that the car ownership per capita in Pakistan is very low.

There is already a trade of about 750,000 used cars taking place every year in Pakistan and more than 50% of this used car inventory has already come online through auto buying/selling portals. Given that trade is moving online, used car dealerships have realised the power of the internet and according to the All Pakistan Motor Dealers Association (APDMA), 4,500 dealerships in Pakistan are putting all of their inventory online on auto sites and other mediums like their own websites, social media, etc.

Not only has the car trade moved online, so has the research part, whereby people decide what to buy. Rather than relying on an auto expert, a relative or a friend, anyone can go online, find out the pros and cons of the different makes and decide what to buy. In a study conducted by Nielsen, Pakistanis spend about three weeks deciding on what their next car will be and the majority of this time is spent online thanks to the abundance of information.

Four thousand and five hundred dealerships in Pakistan are putting all of their inventory online on auto sites and other mediums like their own websites, social media, etc.

— Source: All Pakistan Motor Dealers Association

Services such as car financing and maintenance have also moved online. With over 10 banks offering car financing, the internet is an excellent means for people to compare rates and terms and conditions. In terms of maintenance, services such as AutoGenie allow people to book an appointment with an experienced mechanic who will come to their home and make the necessary repairs. Similarly, Insta Lube, a service launched by Total this April, enables people to call a helpline to have their automobile’s oil changed at their home.

While all the above feels like disruption in the traditional way of doing things, in my view we are only just getting started in Pakistan and all the businesses that are disrupting today will be disrupted in turn unless they innovate. In more mature markets like the US, used car sales are even more disrupted and are almost like buying diapers on Amazon.

However, it is very likely that in the future you might not ever buy a car and start relying completely on services like Uber (shortly launching in Pakistan) and others such as Easy Taxi that are already up and running in order to get from one point to another, or we might start living in a world with driverless cars. You might be thinking not in our lifetime? Well, maybe you should reconsider because even new car sales have started declining in affluent San Francisco, as more people start to rely on Uber to get around and people are also expecting driverless cars to be on the road by 2020.

So imagine being driven around in driverless cars owned by Uber! Disrupt or be disrupted!

Raza Saeed is CEO, PakWheels.com. raza.saeed@pakeventures.com