Covid complications in the car market: manufacturers want to steer the sales of used cars

Plus to minus

In April of this year, Hyundai Motor CIS company launched the UKA mobile application for the sale of used cars. Moreover, the South Korean automobile company was not the first manufacturer to decide to sell used cars. In particular, Volkswagen also uses this scheme.

Hyundai positions its platform in Russia as a convenient and secure service that gives the opportunity to make registration and payment for the purchase of a used car without intermediaries and completely online — not only without looking at the sales office, but also without examining the object of purchase in reality. Although one can see the car live, of course, if one wants.

By the end of May, as the company told Realnoe Vremya, the application was installed by users about 17,000 times, about 6,000 active users were registered in the system and almost 70 requests for booking and further purchase of cars were received.

It is assumed that the geography of the service will expand, but so far it is small: cars with mileage of different models from ten cities of Russia, including Kazan, are presented in the online store. However, according to the official Hyundai dealer in Tatarstan — Transtekhservice company, not a single used car has been sold completely online in the republic yet, although the service itself works in favour of “mixed” sales, when the buyer makes a choice online and finishes the transaction (sometimes changing its object to another) in the salon.

“The history and information about the current condition of cars is provided to users for free, all the cars presented in the catalogue have passed pre-sale service and diagnostics at official Hyundai dealerships," the company argues in favour of buying a used car from the manufacturer. “Users can choose any car with mileage from the open catalogue and before buying, not only find out its history, but also get acquainted with the details of diagnosing the current condition.”

In addition to ordinary used cars, this way one can buy cars that were part of corporate fleets, were used by Hyundai dealers for test drives or participated in the Hyundai Mobility online subscription programme.

According to the company's representatives, the fact that the amount paid by the buyer for the car is frozen only on his bank card and is debited only at the time of the transfer of the car at the dealership — after the buyer checks its condition — acts as transaction security guarantee If the car does not meet the stated criteria, the customer have the opportunity to refuse the purchase and the funds will be returned, the manufacturer assures.

“It is profitable for us”

“Many, and almost all distributors are already engaged in online sales of used cars on their own websites," says the head of the TTS division for sales of used cars, Marsel Khasanov. “They have implemented all the stages, up to the delivery of the car to the client. The Hyundai project is different in that they have made their platform with a separate mobile application. For us, this is a new page in cooperation with Hyundai, the platform has been in operation since recently so far, and it is too early to draw any conclusions. We are currently implementing the pilot project in two cities — Kazan and Ufa. We are interested in this because we have already launched our own mobile application long time ago and have gained some experience, and because now there is a global digitalisation in all areas, and those who start using its achievements faster will learn how to work better in new conditions.”

According to Khasanov, the new programme of the South Korean automaker provides new opportunities to the official dealer, who has been selling used cars independently for a long time:

“It is profitable for us, because we are also placed as partners on this site. This is a mutually beneficial collaboration and recognition of the dealer.

Khasanov explained that the dealer earns a commission of 5% of the cost of the car if he sells a car placed by Hyundai Motor CIS in the UKA application. And if the dealer places his car in the application and they buy it online without coming to the salon, it is the dealer who pays — 1% of the cost.

“We have accumulated a huge practice of selling used cars, and the experience suggests that a client can come for one car and leave in another," he said. “On a photo, the car is beautiful, but the heart isn't in it, as they say. Sometimes it's not even about the condition of the car — the manager can offer something else that one would like more. We prepare for the arrival of the client and prepare four or five more alternative offers of cars of different brands and different configurations.”

“The main thing is to occupy a niche”

“It is unrealistic to completely go into online car sales," says Marsel Khasanov. “The application is a sales channel, a channel for obtaining information, a convenient way to book a car that saves time. And as for buying, a car is still such a thing that a person needs to touch. When buying a used car, there is usually no linkage to any particular brand. Especially if it is, for example, the first car.”

He pointed out another important point — the “one-brand” nature of the application. In general, there can be a wide variety of cars in it, however, as soon as the linkage to the place of purchase is activated, the choice is sharply narrowed. The client, of course, can deliver a car from another region, but at their own expense.

Besides, having come to the car dealership, the client can bargain for an additional discount, take advantage of some sales promotion, finally hand over a used car and buy another one with mileage, getting a discount, but online, they make a purchase without options and pay exactly as much as indicated:

“It is more profitable for a client to visit a car dealership than not to visit it.”

In general, Marsel Khasanov concluded, online sales today account for no more than 10% of all sales of all cars — both new and used ones:

“This suggests that in Russia people prefer to look and touch the car before buying. Therefore, I doubt that someday the market will completely switch to online — rather, it will not be instead, but together with regular sales. This is the first step towards transparency and civility of the used car market.”

Ilya Savinov, the development director at KAN AUTO Group, approached the issue of the development of the new area of the car market by automakers — used car market, as well as online car trading, with caution:

To use the service, it is necessary to download the application and register in it. This, according to Andrey Kalinin from Kazan, who wanted to try out the UKA platform but changed his mind, will be a serious disadvantage for many:

“I would like to change my Hyundai Creta for a newer car. The idea of buying a car from the manufacturer seemed tempting to me: they, unlike resellers, provide a guarantee, and this is reliable. And the car was repaired, I believe, more responsibly, using orginal parts. But when I started loading the application, it turned out that I had to register. But I was not ready to provide my data to the company before I bought a car from them. It is yet questionable whether I will buy something from them or not, but spam will be for sure in such cases. It would be more convenient for me to first look at their offers, for example, on the official website without registration.”

“It's logical”

The reason that automakers are entering the used car market is simple — it is the economic situation in the country, says Sergey Znaemsky, the deputy editor-in-chief of Autorevue publication:

According to the expert, the success of manufacturers in the used car market can also be facilitated by that, unlike private owners and dealers, they have not compromised themselves on it — the degree of trust of customers in them will be higher than in competitors.

“The trend is very right," says Znaemsky. “And Hyundai is the leader in the introduction of mobile technologies in our market, starting with online sales and ending with a car subscription programme. And the second wave of the coronavirus, the looming closure of public places on the horizon, and the reluctance of people to leave their homes once again will contribute to interest in the new platform. And we will see what the demand for this service will be.”

A number of auto experts believe that one shouldn't expect a significant increase in the sales of used cars from automakers.