CARS45, using technology to organize and digitally disrupt the used cars market in Nigeria – Ganguly
Soumobroto “Sunny” Ganguly is the Chief Executive Officer, Cars45, Nigeria’s leading tech-enabled automotive trading platform. Sunny has vast experience as a consultant with specialization in consumer media, hospitality, entertainment, retail, digital marketing and sports, as well as private equity and in Mergers& Acquisitions. He is well versed in speaking to issues around Africa’s Business Environment, Digital Economy, Automotive industry, Business growth and start-up industry. In this interview, he looks at the used cars market as well as how Cars45 has fared against the backdrop of the pandemic and projections for 2021.
Cars45 came with a unique and novel offering to Nigerians, what informed the choice of that service offering?
We found the Nigerian used cars market to be very broken; and filled with a lot of challenges and malpractices. As such, the company was formed with the objective of providing trust and transparency in this market. The Nigerian car industry is about 95% used vehicles. So, it was the attempt of the company to use technology to organize and digitally disrupt the market as it stands. We started about four and a half years ago. We have made substantial progress, we believe, helping consumers and dealers organize the used cars trading business.
How would you assess the current state of Nigeria’s used cars market?
Looking at the current state of Nigeria’s used cars market, I believe it’s becoming better because people have more knowledge and awareness on the choice of car, the price points and the conditions of the car. Our platform has been able to provide consumers with a very wide assortment of verified vehicles at affordable prices. We have also been doing our bit by providing an inspection report to every car that we list and check. These reports provide either the buyer or the dealer with the true condition and market value of the car using our proprietary algorithms. Our platform allows us to gain strategic insight and information around a lot of used cars in the market. That also allows people to make choices based on fair pricing in the market. Because we also believe that dealers are sometimes victims of the condition of the car; they bought a car that is not in good condition, that then gets passed on to the consumer, who then suffers eventually because he has got a poorly diagnosed car. We empower stakeholders with the information they need to make better buying and selling decisions.
How would you compare the Nigerian used cars movement to developed markets like Europe and America?
Used cars businesses all around the world has never been purely transparent or fully organized. I will say developed markets in North America and Europe are maybe four to five years ahead; not too far away. Except proportion of cars traded in those markets which is almost 50% used cars and 50% new cars. In Nigeria, it is 95% used cars and 5% new cars. Therefore, the market remains untapped and unexplored, its huge in Nigeria. The opportunity is immense. The technology we are using or the standards we are following is exactly what any company will do in any part of the world. We have certain challenges around imports because we don’t know and we cannot predict what SKU type and volume is coming in. In many developed countries, because of the local production, they know what is going to be the state of the industry in the next four or five years. That predictability is very important in any market.
What are the challenges in the used cars market in Nigeria?
The grey nature of this market is a big challenge for us. Under declaration of customs duties makes the cars cheaper than when traded on our platform. That’s a big challenge. I think government is trying to tighten that through various land border controls. The lack of documentation on some used cars is another challenge because we like to go back to three ownership generations to make sure the car was properly documented and not used for illegal or incorrect purposes. So, the lack of documentation, whether its imports or the local grey market, stolen cars being traded here and there, and paperwork not being completed from one owner to another are the major challenges.
Earlier on, you talked about the use of technology in your operations. How have you deployed technology in surmounting the challenges in the Nigerian used cars market?
We have three major technology applications that we have deployed and engaged across our operations. First is our inspection app, which does a 212-point check of the car to be bought or sold. This proprietary tool allows us to get the accurate condition and value of the car. The second is Dealer-Auction app which allows us to do price discovery through auctions by our franchise partners. Leveraging our rich inventory of cars, irrespective of their locations our franchise partners can view these cars and place bids on them via the dealer auction app. And then we have data for about 500,000 units that we have already inspected over the years. The data points that we have curated are a source of pricing through data analytics.
One challenge that we have seen is that technical capabilities are very limited in the country. Even where you have good mechanics, many of them were trained in the 90s and early 2000. So, their technology was based on visual assessment. Modern cars today, anything from 2012 has become Electronics-Mechatronics. So, the big challenge for us is how to find qualified technical manpower who can actually help the industry move forward.
Your expansion plan started with moving to other cities in Nigeria and you also moved to Kenya and Ghana; what prompted the move to expand the business to these cities and countries?
For the first three years, we expanded in Nigeria,beyond Lagos, where we saw a big untapped opportunity there. We are now in over twelve cities and our next focus is Kano, which is a big market. This business is urban-oriented. We don’t necessarily look at it from a country point of view but from a city point of view. We set out to cover the major cities of Nigeria and we said where can we see the next phase of growth? End of 2019, we moved into Nairobi, Kenya and Accra, Ghana. We entered those cities because of commonalities in factors like language, culture and tech penetration and adoption is relatively high. It was easy for us to enter those cities. We are quite excited to carry out city-wide expansion in the next three to four years outside of Nigeria, Kenya and Ghana. For now, we are focused on growing our market share and reinforcing our market maker position in our current operational sites.
How is your business doing in Kenya and Ghana?
Our Nairobi and Accra operations have taken off very well. We plan to invest further in those markets and grow them. In Nigeria, we have a good presence in smaller cities like Ilorin, Owerri, Asaba and Akure. We will be ramping up our Abuja operations as we look to deepen our presence in that market as well as Kaduna. The Southern cities which include Owerri, Asaba and Onitsha are doing well as one group and Port Harcourt as one group. I think our expansion is going well. What slowed us down last year was the pandemic. Had it not been for the pandemic, we would have accelerated our expansion into more of these markets outside Lagos.
How has the pandemic affected your business?
You know our business is almost evenly split between digital and online as well as the physical presence. We have Omni Stores and Omni Retail Outlets. We wereaffected between April and August last year; but we recovered from that. Literarily, we had to restrict our people going out to the centres and being physically present at work. We also got affected by the last October unrest that happened in Lagos and Abuja. I think the biggest challenge has been how the buyer’s behavior has changed. We have seen that buyers now prefer to hold on to their cars because they believe they will not get value for their cars if they sell today as such they would hold off on purchases. They would say let me hold on to my cash right now, I am not spending on any new car. This definitely affected us in the short term.
However, as the economy began to open up, from November, things started looking up very well. Four months on, we have recorded strong and steady growth.
Another aftermath of the pandemic is that we have seen people who hitherto were driving to our inspection centres easily but now because of the convenience of e-commerce, they want those services to be delivered to their houses and offices. We have had to reinforce our remote and premium inspection service part of our business to cater for this new pattern and we have seen it go up.
I guess one can safely say that there is a “New Normal” in your business. How have you weathered the storm under this new situation?
Inspectors now go out to offices, homes, estates to do inspection. We have also partnered with a lot of filling stations and other automobile retail companies. That’s convenient for customers to reach a place close to them. They don’t necessarily have to come to our own centres, which could be a close distance to their homes. We encourage remote working in a big way. If you noticed in our office today, we have few staff as we have our shift system where they only work two or three times in a week. We don’t want to crowd people in here. I think if technology can be leveraged well, we can really conquer the effects of the pandemic.
Tell us more about the unique offerings of Cars45 like Mekanic45, EasyShipDirect and other value-added services?
Our objective is to be present and deliver value in the entire lifecycle of the customer’s journey that has to do with automobile ownership. If you buy the car, you should do it with us. If you repair or import the car, you should do with us, if you liquidate, you should do it with us. That’s the whole idea and we say if you want to do a direct import, you can pay in local currency. We will bring the car from the United States or Canada and drop it to your doorstep. Whether it’s transportation, logistics, customs clearance, paperwork, we will take care of all that. It has been an interesting service. Mekanic45 also allows the customers to remain in touch with us as we provide the tools to fix it, service it and return it to them. The convenience factor is very high. We are fully responsible for the job we do. It’s not the individual workshop or the garages.
We also have institutional and corporate sales unit for large companies who own a large fleet and want to liquidate them. We have established e-auction platforms for them. They can sell to their own employees or to our dealer network or the general public. Some companies have also approached us for procurement as well. Because for many organizations, sourcing and supply can be a tricky subject, we provide quality assurance, transparency and pricing and procurement as well for them. The testimonials we have received from corporates have been encouraging. We also provide services for some government agencies where we take over their workshop and maintain and run their fleet for them. That is a headache that most people and organizations feel they don’t want to take on. We are very big on convenience, everything that takes the burden off the consumer – end-user, dealer or corporate body – we’ll provide.
Seeing that in most developed markets, financing of vehicles has been a key peg for driving ownership, we also have developed two finance products for our stakeholders. One is for our dealers. If they want to trade cars that we supply to them, we provide them short-term credit of about two months by which they can buy the car from us with dealer finance and they can sell it around the money within sixty days. Another product is the Consumer Finance Product with some banks and financial institutions who are our partners where eligible – pre qualified buyers can select vehicles from our marketplace and they get it financed from our banking partners at very affordable interest rates and convenient payment plan.
We also have a partnership with the leading distributors of new car brands, such as KIA, Kewalrams, CFAO Suzuki. That’s one of the big “trade-in’ programmes that we have, where anyone can drive in with their old car and get a value for it and swap or upgrade to a new car of that car brand. We have two more partnerships in the pipeline which we hope to announce very shortly. We also have partnerships with other players in the ecosystem, Asharami Synergy, Total, Fatgbems to improve value creation inthe automotive industry.
What are your projections for the year 2021?
In the last six months, we have seen an uptake almost three times of what it was in the previous six months. In the next financial year, we hope to do 250% of what we did in the current financial year. Our business is coming out of the pandemic strong. At least the Lagos market has come back up very strongly. As we open new cities, they would contribute to the growth of our business.
As a responsible corporate entity, what CSR initiative is Cars45 offering to its business environment?
We have three major programmes that cover development and corporate social responsibility. The first is we have a big mechanic training programme. In Africa, there are still lots of individual mechanics who don’t have workshops or skills to fix cars. So, we encourage them to bring cars and customers into our network by which they get a commission. They are also encouraged to fix the cars in the workshops that we allocate to them. The second one is our flagshipautopreneur initiative, an entrepreneurship programme where dealers, merchants or dealer agents are encouraged to bring cars to buy or sell or carry out other services on our platform and get a referral fee. To get into the programme, they have to undergo an expansive training we conduct that cover topics such as negotiations, law, communication, automobile basic engineering. To stay in the programme, they have to renew their training every six months. Like I said before, a lot of them have an old knowledge of automobile; this will help them to upgrade and then complement by giving them all the tools (tablets and pads) that allow them to do the inspection and empower them to become successful businesspeople.
Can you let our esteemed readers to know more about you?
My education was in Law followed by a Management degree. I have spent the large part of my working career as a management consultant, and then at KPMG. It was KPMG that brought me to Africa about five and half years ago for a cinema project with the Genesis Group. I was deputy managing director for Genesis Group for about three years and I was based in Port Harcourt. This stint allowed me to understand the consumer and African market very well. After that, I served as a strategic Business Advisor on the board of many companies including Cars45 and eventually I became the CEO at Cars45 last year.
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