Digital disruption is rapidly gathering steam in South Africa’s second-hand car industry, with tech start-up CarZar a prime example of this, offering an online-only model, a 30-minute sales service and data-based pricing.
The car industry is one in a long line of industries which have been vigorously shaken up by online business models with lean set-ups, low costs, no middlemen and fast turnaround times.
Fernando Azevedo Pinheiro, joint MD of CarZar, says that with Internet connectivity in South African constantly on the rise, more and more consumers are utilising services provided online or through mobile apps. This opens a series of opportunities in different industries which have not innovated much in the last few decades.
In addition, the tough economy means the price gap between new and used cars is widening, making second hand cars a very attractive option as new cars are now out of reach for many people.
“These influences combined mean that the prestige of owning an expensive car is slowly being replaced by a more utilitarian attitude towards cars. The auto-trade market as we know it today will look fundamentally different in the next five to ten years, in our view. The demand for second-hand cars is, therefore, on the rise.”
Michael Muller, joint MD, says disruption forces traditional businesses to reinvent themselves to compete with nimble start-ups. “In South Africa, the taxi, hospitality, media, property and electronics industry have all been turned upside down by online entrants. Now it is the turn of cars.”
He says a number of factors have come together to create a “perfect storm” of disruption in the auto-trade market. “The way we use cars is changing, fundamentally and rapidly. The Uber phenomenon is showing no sign of letting up and car sharing apps are on the rise. Major car manufacturers are looking into models which allow people to borrow rather than own cars.
CarZar is funded by Cape Town-based venture capital firm, Silvertree Capital.
“Our model is all about helping consumers sell their car as quickly and easily as possible,” says Muller. “We offer online evaluation in 30 seconds. The price is decided on a data-based algorithm and if the quote is satisfactory acceptable, you book a physical assessment slot, online. A valuator visits you and, if the offer is suitable, the deal is done – paperwork and all – in less than 30 minutes. The money is in the bank that same day.”