• AutoDeal launches ‘buy online’ feature for new cars; same for used cars in 2021
• Philippines one of Asia’s fastest growing automotive markets
• Filipinos increasingly ready to perform more auto transactions online

Auto marketplaces are rapidly embracing digital mechanisms for car sales, a move that has been accelerated further by countrywide lockdown measures instigated by the Covid-19 pandemic. However, the trend has been slower to take hold in developing markets, which makes the case of AutoDeal in the Philippines interesting. The Frontier Digital Ventures (FDV)- backed company is the first marketplace in the country to let users buy vehicles online.

AutoDeal, one of the leading auto verticals in the country, launched the service in May. However, as with many such examples globally, we consider it “almost digital” – it’s not quite digital retailing yet. A user can identify a vehicle online; get a quote; apply for and negotiate financing; decide on a down payment; and even place a deposit. But you can’t actually buy the car online.

Nonetheless, digitizing the bulk of the process is a significant step in the Philippines.

Rising demand for new cars

AutoDeal‘s business focuses primarily on new-car sales and the vertical is one of the leading sites for new cars in the country by sales volume. The focus on new cars is a strategic decision. The competition in used cars is intense in the Philippine market and AutoDeal believes the sector for new vehicles is “less prone to disruption from lower-value participants” as stated in FDV’s FY2019 annual report.

For the past few years, the industry has slowly moved toward end-to-end online sales, buoyed by a burgeoning middle class and an increasingly tech-savvy population. In that time, the Philippines has emerged as one of the fastest-growing economies in the world, featuring foreign business incentives, political stability and already high levels of online engagement.

“We’ve been partially transacting online for a few years now. Moving the rest of the process online is a fairly easy and logical next step,” AutoDeal cofounder Christopher Franks told the AIM Group.

After the initial online inquiry, it takes a buyer about 45 days to purchase a vehicle on AutoDeal. Over the course of 2019, there were more than 322,900 requests for quotes and test drives made on its platform. Here’s how the online-buying process functions on the auto marketplace:

• To reserve a car, car buyers need to make a vehicle selection and fill out the online reservation form on AutoDeal.com.ph. After filling in details about their chosen vehicle, such as vehicle make, model, variant, and color, and entering their contact information, the customer can select a dealer from the website’s range of partner local dealerships.
• Customers will be prompted to make a reservation payment through the website’s preferred payment gateways, including PayPal, PayPal Credit, MasterCard, and GCash. The tech startup aims to add more payment methods and offer more suitable options to consumers in 2020.
• Once payment has been made, the customer will receive email and SMS notifications confirming the receipt of payment. They will be contacted by a partner sales representative to discuss the options available for test drives, car viewings and payment completion, either through cash or financing options.

At the moment, this process is only active for new cars. The primary bottleneck to rollout in used cars is the necessity of a thorough inspection service, which guarantees buyers an honest vehicle history and increases general trust of purchase. AutoDeal is currently in the process of setting up this infrastructure.

“We’re just focused on new cars at the moment. We will look to roll out motorcycles later this year, and then used cars in 2021, when we have inspection in place,” Franks told the AIM Group.

Asia has become a hotbed of m-and-a activity over the past year — including 58.com’s recent $8.7 billion privatization deal — a sign that investors and international marketplace operators are beginning to see significant value in local consumer markets, particularly in online-friendly segments like autos and real estate.

One of the Philippines’ main strengths is its macroeconomic resilience to surrounding financial crises; a result of increased spending on domestic infrastructure and other national projects. This results in a safe and reliable investment climate for overseas businesses, particularly during financial crises when other countries are on the decline.

In December, Malaysia-based FDV acquired an additional 19% stake in AutoDeal for $2.2 million U.S. to become the majority shareholder in the company with a 55.8% share. FDV paid more than $2 million to acquire its original stake in AutoDeal in 2017. FDV has holdings in 12 marketplaces across 14 emerging markets.

The Philippines is the second fastest growing new-car market in Asia, behind Vietnam. Dealerships sold 420,000 vehicles in 2019, up from around 200,000 just a few years ago. This is, in turn, creating a bigger market for used vehicles.

“In 2019, we saw consumer activities that potentially mark the beginning of a paradigm shift in buying trends. On the business side, online penetration is growing, with brands investing more heavily in their online channel than ever before,” said Franks.

New-car sales are expected to plummet this year. According to the local associations, the drop will be somewhere between 20% and 40%.

But Franks and co-founder Daniel Scott see hope in the used- car market, which was starting to pick up before the countrywide lockdown killed car- buying interest.

“The used car industry is still a bit like the Wild West. There aren’t a lot of capital investments happening with used cars from the conglomerates yet. But that’s likely to change,” Scott told the AIM Group.

Covid-19 may boost vehicle ownership

AutoDeal sees the new-car market as the largest driver of its used-car sales. The rapid growth of the new-car market (and easier access to finance) has led to a large number of unpaid loans, which, in turn, led to banks repossessing many of these new vehicles and releasing them back onto the market as used cars.

As the Philippines starts to emerge from lockdown, which ended on June 1, many Filipinos are considering buying vehicles. Under lockdown, public transit and ridesharing services were banned from operating, restrictions that only started to ease up last week.

“If you didn’t have a private vehicle and you needed to go to the grocery store to pick up food, you had to walk,” said Franks.

As a result, AutoDeal has seen a rush of first-time car buyers looking at entry-level used vehicles as an alternative to public transportation.

ZigWheels with impressive market entry

The Philippine auto marketplace is highly competitive. The leadership battle at present is between two rivals: Carbay Philippines and AutoDeal.

Carbay is the holding company run by India- based CarDekho, which encompasses two marketplaces in the country: ZigWheels.ph and Carmudi.com.ph.

Philippines was the second Asian market selected for expansion by CarDekho via its ZigWheels brand. ZigWheels is now neck- and-neck with AutoDeal in terms of traffic. Based on Google Analytics data, ZigWheels.ph saw 2.1 million total monthly visits versus 2 million for AutoDeal in May.

However, AutoDeal boasts superior engagement statistics, with a longer average session duration, greater page impressions and a lower bounce rate. The FDV-backed vertical is also almost certainly ahead on revenue.

Nonetheless, ZigWheels’ progress has been remarkable considering the vertical wasn’t even a Top-3 auto marketplace in the country in May 2019. Editorial content has played a significant role in its rise.

Carmudi Philippines, which was bought by CarDekho in November, is a fringe rival to The Top 3 at present. Its traffic has declined massively since 2019 — perhaps a sign that CarDekho is directing its traffic to ZigWheels or restructuring its current online proposition entirely. The site saw around 250,000 monthly visits in May, according to SimilarWeb.

“The market demand for new vehicles in Philippines has grown at a CAGR of 14% from 2014–2018, with new car sales crossing 380,000 units in 2018,” CarDekho co-founder Umang Kumar said at the time of the acquisition.

“We see this growth as a big opportunity to digitize the Philippines’ auto ecosystem and engage with consumers throughout their online car-buying journey.” Zigwheels Philippines is skewed toward new cars, while Carmudi
Philippines toward used vehicles.

Philkotse.com rounds off the Top 3 auto marketplaces in the country. An established local presence, it has one of the largest inventories of used cars. Its trafc has been relatively unstable, leaping between 1.5 million and 2 million total monthly visits over the past six months, according to Google Analytics.

Another vertical considering entry into Philippines is Malaysia-based Carsome. The c-to-b marketplace buys cars directly from consumers and offers an auction system that lets dealers bid for used cars. It’s active in Thailand, Malaysia, Singapore and Indonesia.

“The Philippines has been part of our plan for 2020, and this will likely be through a JV format. It seems that the infrastructure and technology in the Philippines are not advanced compared to other countries that we’re in right now. In terms of competition, we don’t see any similar players. I think we are considering a few m-and-opportunities in the Philippines and would not limit ourselves to fully building everything from scratch,” Carsome CEO Eric Cheng told regional media in early 2020. – AimGroup