Early in the summer, Glasgow Consulting’s Partner – Automotive & Mobility Practice expert Vishal Pandey gave a fascinating insight into the Saudi market via Automechanika Dubai’s webinar series.
He returned for a new online session last month with Tarek Kabrit, the CEO and Co-founder of Seez, an AI-driven, data-first automotive platform and Dubicars.com’s CEO Craig Stevens. Their task was to explain why the Saudi Arabian and UAE markets are shifting towards online sales at a time where there is also unprecedented levels of used car ownership – to the potential detriment of new car sales.
While this is obviously good news if you run a company supplying the aftermarket , historically unheard of ratios of 2:1 in favour of used vehicle sales also has ramifications for the auto-industry and gives us an insight into a wider social change underway in those two countries – and likely beyond.
“There is clearly a growing preference for used cars and we see this trend growing pretty strongly over the next five to ten years,” says Pandey early into the conversation. “Looking at the Saudi market in 2020, there has been some exodus of expatriates out of the Kingdom (same as the UAE). We have also had women come into market after the driving ban was lifted. Then we saw VAT going from 5%-15% effective July 2020.”
Throw these factors into a market which is already booming with young tech-savvy consumers, Pandey believes there is a clear push towards online sales amid this changing landscape. The Saudi and UAE consumer now know the value of researching on the web with six out of 10 people now willing to purchase online too: “They are going online to research as part of the decision-making process,” he explains.
Pandey’s own research into consumer buying behaviour also suggests that COVID-19 is playing its part in accelerating the trend of used car sales outpacing new car sales in the neighbouring Gulf countries. Data also indicates that they are considering leasing and co-ownership options at a scale not previously seen in the region.
“With Covid-19, e-commerce and e-retailing are in the limelight especially for used cars,” he reveals.
Consumers are turning to sites like Seez to search for their next vehicle. The platform links used and new vehicle dealerships in the UAE, KSA and Kuwait to those potential buyers. Its CEO Tarek Kabrit agrees that the pandemic is clearly pushing online demand.
“Our aim is really to use technology to enhance the transparency in the market for the buyer and to help advise them on what to look for and what to buy,” he says. “A key area of interest and focus for us is online car buying and we’re pushing heavily into that space.
There’s been a new demand and growing demand into that sector particularly because of Covid-19 and it’s an area that we’re pushing hard on.”
Dubicars.com’s CEO Craig Stevens adds: “I think this market was definitely moving towards a used car market. It started off two/three years ago… new car market ratios have fallen from four new cars to every one used car. We’ve seen that flip to two used cars to every one new car.”
Stevens argues that part of the reason for this change is that the expats that are remaining in the UAE are becoming cost conscious car buyers.
“I think people are starting to understand the value of used cars. So, Covid-19 has actually just accelerated that move towards to used cars. It was really fascinating that when we first went into lockdown, we did a poll straight away to find out what consumers were thinking and the number one on their list was sanitisation… I want to buy from somewhere where I am confident that the cars been sanitised…And that’s obviously where the dealers can do a great job versus the private market.
“The second thing was then finance, but it was about flexible finance – buy now, pay later; give me some protection against redundancy. And then it was price. They were very much thinking of the moment, sanitisation and finance. We did the same poll this week and it’s completely flipped on onto its head. Now it’s all about price and so it’s [the demand] going back to the private market. It just shows you how people think differently in a very short period of time. When I looked at sanitisation, I think it was seventh on the list. So, people have already got past that concern around sanitisation and now it’s about choice and price. Finance is still a key part of that.”
Stevens says the net result in the UAE market, at least, is a surge of used vehicles: “There are some estimates that there are potentially up to a hundred thousand vehicles that are coming into the market through defleeting rental car companies and so on, and so forth. But that’s great for the consumer. It means they have a lot of choice.”
Kabrit’s Seez is a firm that it is flexing its muscles in the digital space with much of its business involved in providing leasing options for people “who choose not to buy” and instead lease a car over periods of one, two or three years: “Within that model we charge on a lead basis; we get paid when we send those leads. A second angle to our business is independent of that but does rely on the data we get which is a SaaS product. We sell that to the OEMs mostly: it gives them insight and predictive analytics on where the market is moving in terms of pricing, demand-supply and all of that.”
Seez is also helping an unnamed government agency to digitise its car registration process, Kabrit says the work is helping the company develop a seamless online experience for consumers. Potentially, it could mean buyers never needing to enter a showroom.
“We’re building on top of it to really have the full online journey because we need to register the car at the end – that’s the last step in the car buying process. A lot of dealers say we’re launching online buying, but really what they’re launching is an online booking platform: where you have a website; you put a down payment on the car. But you haven’t really bought the car yet. You’ve just booked at by that point. We’re working with a lot of these dealerships and the government to really go all the way down to literally registering the car.”
While Stevens shares the vision of a fully digitalise retail journey, he argues that for used vehicles there remains a need for human interaction at some point.
“I think people still want to see the dealer and the dealership and they still want to touch and have a test drive. There is lots of activity offline. I think it’s very different from new cars. Our view is quite simple. We are completely impartial. We don’t sell our own product. We give the dealer all the tools they need and the private sellers what they need. We try and marry them as best we can but we don’t influence that decision at all. We don’t gain from that, so we are completely impartial in that sense.”
While it can’t fully replicate face-to-face interaction and the magic of being able to see and touch a vehicle, Tarek argues that the biggest strength of online is the convenience of it. He estimates, however, that a sizeable chunk of 30-40% of buyers will not want to do the whole process online.
“When we talk about online buying, at least, our personal view is we don’t feel a large number of people are going to be buying a car purely online – as in sitting on their sofa and ordering the home delivery of a car. But when we talk about online buying, we envision an omni-channel experience where people will be able to move between online and offline seamlessly….and continue that journey just like you do with an Apple phone. You go to the Apple Store and you play around with it; then you go back home and research it online.
“You might order it on Amazon or Apple, or whatever. Really having that digital journey fully digitised will allow people to move between the two. That capability is what’s important.”
In effect, wrapping the purchasing process up in technology can open up not just the way people buy but also the types of offering dealerships and distributors can make: “For the buyer, one of the perks is being able to start the journey online; go to the showroom; test drive the car. And there are few other perks, you get the extended warranty, you get servicing, you can return the car within three days if you don’t like it, which is a fairly big perk in a lot of cases.”
Stevens agrees that dealers must start to understand that they need to be concerned with not just websites but the whole customer journey. He sees other room for improvement too, and happily lists them.
“There’s also a lot of stock in the market, so dealers can move towards a velocity model; moving cars faster with lower margins and better prices. They can take share from the private sector and they can export export cars. I think the dealers must start to engage with the consumer very differently than just putting posters down the Sheikh Zayed Road.
“It’s about a proper digital engagement strategy for consumers for thing is learn how to properly do digital marketing. So, this isn’t about three photographs and one line of description. It’s about a proper online experience that gets you to the point where you want to transact.”
The move online presents a major opportunity for dealers to capitalise on the UAE’s position, in particular, as a major export hub. With people from the continent buying more used cars from the Gulf than ever,what are the types of cars are they buying? When asked what is more common, US, European or Asian cars at the moment, Stevens replies: “Cars from the USA are in more demand in general but it is actually cars that have a GCC-spec that are more in demand for exports, especially for Africa.”
Kabrit adds that his company had seen a similar trend albeit in slower volumes because of the economical and logistical obstacles raised by COVID-19.
“The trend for typically GCC specs is there. The UAE is an export hub, so a lot of cars get pushed from there to Africa as Greg says.”
“There is no doubt about it, Africa is a fantastic opportunity for the UAE,” adds Stevens. “If we just look at Ethiopia, they imported 800,000 used cars last year and the UAE’s currently only exporting 250,000 cars. Our Research into Africa shows that the African Market likes buying from the UAE. There are good trading relationships already in place. It’s quite easy to export from here. It’s quite safe. But I think the dealers have to do a lot more online to give a buyer from Africa more confidence.
“They’re competing against the American market, the Japanese market which are quite a long way ahead in terms of technology. Africa is definitely a key area for some of the older European cars and certainly for some of the super cars that are over here. They have global appeal. They’re incredibly well-specced and have incredibly low mileage. Some of them haven’t been driven at all and never left the showroom.
“And of course, these are other collectors cars or certainly investors cars that have been shipped all over the book. So yeah, I think the UAE has done a phenomenal job so far in exports without really investing in the digital side so I can only see a great upcycle from that. I think if there’s a concerted effort, I think the UAE has a phenomenal opportunity and take on the Japanese and US market for exporting.”