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Tech Talk: Online middleman seeks to disrupt used car market

Updated May 12, 2019

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CEO Raja Murad Khan seeks to disrupt the used car marketplace.
CEO Raja Murad Khan seeks to disrupt the used car marketplace.

Do you want to sell that old car in the garage that stays more at the mechanic’s than with you? But even the thought of visiting the dealer and negotiating a price kills all those plans of finally getting a new car? Don’t worry: a tech startup is trying to solve exactly this problem.

CarFirst is a Lahore-based startup that acts as a middleman, buying cars from consumers and selling them to dealers through online auctions: a classic consumer-to-business-to-business model.

The way it works is you go to their website; fill a form for online valuation with details such as brand, year model, mileage etc to get an instant price range for your car. Then you can book a free inspection from CarFirst experts at one of their centres, where they will make you an offer. And if the customer agrees to it then begins the document verification phase with the government bodies and once everything is clear, the company takes possession of the vehicle and makes the payment.

The entire inventory is finally updated on the dealer app from where buyers can search through the stock and bid for whichever ones they like in a competitive auction.

Other than the marketplace model, CarFirst is trying to expand its outreach through a number of initiatives such as corporate fleet programme — a bulk dealing scheme for companies, a merchant programme that hopes to bring on board small auto dealers.

Given the sizeable amounts involved in the industry, the startup doesn’t have any payment channels integrated and clears its dues through corporate cheques and pay orders mostly. The verification process, followed by payment, can take up to a week or so but that’s the window Chief Executive Officer Raja Murad Khan wants to minimise. However, on-ground realities still don’t allow for that to happen, not yet at least.

“Quite a few of the cars in Pakistan are benami which we don’t deal with. So we have to get the owners transfer their vehicles to their name and then proceed with the purchase. Then there are delays with excise departments and other scrutiny steps,” says the CEO.

The startup was founded in late 2016 by Khan, a former managing director at Carmudi. “This idea had been tested successfully in India and the auto policy had just come out here so I felt the time was ripe for such a business here as well,” he recalls.

The startup wasted no time to bag (undisclosed) investments with seed round in November 2016 and Series A coming in February 2017, both from Frontier Car Group (FCG) — a Berlin-based startup that invests in used car marketplaces. By May 2018, they had gone for the second funding round, again from the same investor which in turn had raised money from Naspers --- the parent company of OLX. The website was developed by FCG while the enterprise management is done internally that in turn feeds data into their valuation algorithm.

Read: CarFirst receives Pakistan’s largest ‘Series A’ funding

As for the business model, it’s quite simple: they buy cars from consumers, sell them to dealers and keep a certain margin for themselves.

Until now, much of the activity within Pakistani auto tech has been concentrated in the classifieds, with things often getting ugly between local PakWheels and the global OLX.

The former, however, has been active in the verification business for a while now so how does CarFirst differ from them? “We don’t sell inspections and give certifications, for us the process is meant to be for internal use only as we buy the evaluated cars ourselves,” Murad explains.

However, they have recently ventured into that business as well, albeit indirectly. “We are serving as the backend to Car Pro — a vehicle inspection report from OLX, with whom we are connected through the same investor.” he adds.

Currently they are operating in Karachi, Lahore and Islamabad/Rawalpindi through quite a few service centres but Khan plans to expand his footprint much deeper into the country. “Hopefully by the third quarter this year, we will be entering some six cities,” says Khan. As of today, there are 24 company-owned purchase and inspection centres as well as four warehouses.

How much sense does it make for a rapidly scaling startup to do everything in-house, from opening service centres to training engineers for evaluation?

Why not go for a more decentralised model like franchising its inspection centres to the dealers? “It would make quality assurance impossible and as a young brand, that’s the most important thing to us,” says Murad.

Let’s see if they have enough fuel and mileage to get them to their destination.

The writer is member of staff:
m.mutaherkhan@gmail.com
Twitter: @MutaherKhan

Published in Dawn, May 12th, 2019