Driving digitalisation in the auto industry

Photo by Torsten Dettlaff

From its founding five years ago, Carro, an end-to-end automotive platform, has grown to become Southeast Asia’s largest automotive marketplace – facilitating not just the buying and selling of cars, but also insurance, financing and maintenance. Now, Carro is disrupting traditional car ownership by providing drivers with an end to end platform for all aspects of car ownership. In the last six months, the Singaporean SME has seen continued growth during COVID-19, and has even started hiring to expand its team.

SMEhorizon speaks with Aaron Tan, CEO and Founder of Carro, on how technology can enhance mobility despite the pandemic, the Singapore automotive marketplace, and the e-commerce platform that is driving his business.

Aaron Tan, CEO and Founder of Carro

We often think of COVID-19 as having restricted our movements. How can technology enhance mobility in a COVID-19 world?

COVID-19 had indeed changed the way people drive and accelerated innovation in the auto market. The current economic slowdown is bringing out more customers who are looking for value-for-money options while being aware and attentive about their safety. Due to this change, we expect customers in Singapore and the region to opt for digital purchasing solutions.

With value, safety and efficiency now at the top of the drivers’ mind in their car purchasing experience, it is more crucial for the auto industry to adopt digital-first approaches. Some of the key solutions that enable us to respond to the new, evolving customer needs and concerns are all fully digitally driven.

For instance, we realised that we could streamline the entire purchasing process and simplify the journey for customers by providing them with everything they need online. For this, we built the region’s first fully contactless car purchasing. Singapore is the first market where this service was introduced and we believe that it is a concept that could take off in our other markets, especially as they contain some of the region’s largest car driving populations.

By enabling convenience through such technology-based services, we can empower more car buyers across Southeast Asia to conduct transactions from anywhere and at any time.

What was the Singapore automotive marketplace like pre-pandemic? In particular, could you elaborate on the increased presence of car subscription services?

While car subscription services are now common in bigger markets such as the U.S. we are the first in the region to provide such a service. We believe there is a lot of untapped demand in Singapore and the region for used-cars – a sector that has been growing every year, and this trend was evident even before COVID-19 happened.

In the past couple of years, customers have generally become more open to the sharing economy concept and are exploring opportunities that offer ownership of big-ticket items without the expensive commitment of purchasing the item in full. This has been apparent in the fashion industry, movies, entertainment content and now cars. When we first introduced this service, there was no one else in the Southeast Asian market offering a similar service, including conventional rental companies.

How has the onset of COVID-19 affected this marketplace? Do you see the trends as continuing?

We strongly believe that digitalisation and the contactless car purchase experience will be here to stay; they are intrinsically linked because digitalisation is a primary enabler of the contactless experience. We definitely see more consumer demand for new ways to buy cars and this was happening even before the pandemic – we think it has more to do with changing consumer behaviour, smartphone adoption and continuous demand.

We have observed that there is now less demand for in-person viewings and price haggling among younger-generation car buyers, which is why the new digital retail experience is gaining strong momentum. We foresee that, soon, there will be fewer large-scale showrooms due to prohibitive costs and reduced foot traffic.

Instead, smaller and nimbler dealers will emerge by focusing on social media marketing and going direct to the consumers. All of these point towards dealers adopting more technology and placing less emphasis on a physical office, some of which we are already beginning to see in China.

It also helps that Singapore’s government is supporting greater digitalisation efforts among SMEs. This includes the Productivity Solutions Grant (PSG) which subsidises up to 80 percent of the cost for SMEs to adopt digital solutions. This is an important incentive.

How long has your “Netflix for cars” service been available? How was it developed and how has COVID-19 affected it?

In Singapore, cost and maintenance are the two biggest burdens of car ownership. An average person takes around six years to pay off their car loan, and two-thirds of these people trade in their cars before they have paid off their debt and get a new car, therefore incurring even more debt and compounding the cost burden.

Therefore, in 2019, we decided to create a one-stop solution that would simplify car ownership; one that could handle all the nitty-gritty details within one affordable, flat monthly fee. Customers can choose cars that suit their personal lifestyle and needs under three subscription plans. Apart from the monthly fee, we take care of all other costs that have typically burdened drivers: such as road tax, warranty, 24-hour assistance and maintenance.

In March 2020, we partnered with NTUC Income to introduce Singapore’s first pay-as-you-drive usage-based car insurance. This model helps our car subscription users enjoy savings, convenience and hassle-free experience as they pay insurance only based on how much they drive the car. The less they drive; the less they pay.

We developed this solution as a response and in support of car drivers that were paying the same flat fees, even though they did not drive as much due to the pandemic. Its demand has been growing as driving behaviours (i.e. around distance and time consumed when driving) have undergone impactful changes.

How significant is the e-commerce platform to your overall business? Could you tell us about the technical team that oversees it?

Carro’s marketplace is our core business, and we are constantly improving on it by injecting more transparency into the used market trade so customers can see the quality of cars, as well as the purchasing process and its seamlessness.

Meanwhile, our e-commerce platform challenges the traditional way of buying and selling cars through a proprietary pricing algorithm. Currently, we are the only tech-marketplace in SEA that is providing an end-to-end experience, every single step of the way by applying as much technology as practically possible.

For instance, we wrote our own CRM (Customer Relationship Management)/IMS (Inventory Management System)/ DMS (Dealer Management System) modules internally in order for us to better serve our customers and offer this service to our dealer partners.

Also, our recommendation engines, pricing engines – as well as credit and underwriting systems – help to make better sense of obfuscated proprietary historical bid information, as well as public information, to come up with relevant matches or more accurate pricing for the consumers.

What are the long term trends in your industry?

We anticipate that the demand for used cars across the region will only grow. Simultaneously, more buyers are prioritizing safety due to COVID-19 and seeking more convenience via technology. These are the two biggest motivations behind our plan to expand further across the region and establish a foothold in newer markets like Vietnam, Philippines, Taiwan and Cambodia, countries we see can significantly benefit from the greater digitisation of their used car sectors.