Complex Made Simple

UAE digital used-car retailer CarSwitch turbocharges into Saudi

Imad Hammad, Founder and CEO @ CarSwitch

Recently, CarSwitch, a UAE mobile-first used car retailer, announced its official launch in Saudi following a successful soft launch in the Kingdom in 2021

The Saudi car market represents over 35% of all GCC sales in the region In passenger vehicles, used car supply is ultimately fed by new car sales and so market shares are closely linked "Our key goal is to target profitability in Riyadh, Jeddah, and Dammam within 3 years"

An AMEinfo exclusive

Recently, CarSwitch, a UAE mobile-first used car retailer, announced its official launch in Saudi following a successful soft launch in the Kingdom in 2021.

In a press release, CarSwitch said it would be targeting the 30 billion SAR ($8.1 bn) pre-owned automotive market. It said it would provide both used car buyers and sellers better prices through direct seller-to-buyer deals, via its proprietary 200-point inspection protocol.

AMEinfo interviewed Imad Hammad, Founder and CEO, CarSwitch, and took a comprehensive look at the sector by asking the following:

1- Is the automotive sector growing in Saudi? Why expand there now?

“The Saudi car market represents over 35% of all GCC sales in the region and is on the steepest growth trajectories globally. In Q1 of 2021, KSA accounted for 1.5% of global sales – a 28% growth in absolute volume of sales.”

2- Are more drivers, mostly women, entering the Saudi market?

“The growth in Saudi is being driven by youth. Almost 70% of the population is under 30 with 50% of those under 25. If you look at the wider issues of a relatively limited public transportation network, then the pattern for an increasingly mobile population has to follow. And since the structural change in KSA took place, that growth is certainly being accelerated by women being able to drive independently.”  

3- What helped you arrive at your decision to expand?

“The Saudi government has been very focused on developing the right business environment for the automotive sector. Last year, KSA surpassed Egypt to rank second in total share of MENA startup venture funding, growing 65% YoY in H1 2021.  With all these conditions in place, we felt that 2021 would be an absolute must for our future growth.”

4- Do people prefer hail-a-cab over owning a car?

“Cabs and taxis have exploded in their popularity over the last decade, and now that market has matured. But really, for practical reasons, speed or just pleasure, the desire to own one’s own car has always been there versus using a cab.  We looked at the economics of owning a car versus using one of the government taxi services in Dubai and for many, the numbers in favor of owning far outweigh alternatives. More details on this can be found here.”

5What brands are most in demand for used cars? Is it proportional to demand for new car brands?

“In passenger vehicles, used car supply is ultimately fed by new car sales and so market shares are closely linked. There is some variance between nationalities as some tend to favor brands that are also popular in their home countries. However, across the board, the numbers of used cars are generally linked to the new car sales as used car imports are a fraction of the landscape.

SUVs have remained consistently popular in the UAE throughout 2021 and had a slight surge during the summer months. Across the year to date, they have led the category by just above 50% of total sales followed by the Sedan class. The remainder of our sales were quite evenly split across coupes, convertibles, and pickups in the UAE. In KSA, Toyota dominated the field and led sales by 66%, followed by Mercedes Benz, Hyundai, Ford, and Chevrolet.”

6- How have new-car/used-car-buying habits changed post-COVID?

“Buying habits have certainly evolved over the last 18 months. Now that people are returning to a new form of normality, the way people are managing their larger purchases has also changed. People are more price-conscious and this has led to certain segments gaining a lot more market share. In the last year, the chip shortage issue has had an impact globally and with these shortages, naturally, the used car market has had more demand.

“One key trend has of course been the rise of digital retail. Many more people were at home for extended periods and for platforms that invested in providing their customers with an online-first approach, they were able to benefit enormously. At CarSwitch we’ve seen this, particularly on the buyer side. as people have moved from just using online as a research tool and are now making that online transaction much more readily.” 

7- Are savings in costs for used cars counterbalanced by issues related to security, durability, and maintenance?  

“Traditionally, there has always been an element of financial factors, issues related to convenience, and of course, a question of trust when it comes to the used-car sector. We’ve made significant steps to mitigate all of this entirely by certifying all our cars with a rigorous 200 pt. online inspection report as well as educating buyers about their potential purchases and ensuring that the financial transactions are safe and secure.  For our sellers, we make their lives easier by managing the sales process from photography to pricing to test drive.”

8- Do you acquire your cars from the local markets where you operate?

“CarSwitch is a peer-to-peer platform and so all of the cars are owned by private owners from the local market. In this way, buyers purchase directly from an end-user in a private transaction that is protected by CarSwitch ensuring both seller and buyer get the best value but remain safe through the transaction.”

9- You reached $100 million in total sales. What’s the average value of a car sold?

“In the UAE, it is 60,000 dirhams (Over $16,000).”

10- Are you self-funding your expansion to Saudi?  

“Our business model is digital-first. This means that our expansion is about scaling our digital presence first with a small but nimble team on the ground in Saudi. Without the need for real estate to house any cars, we can grow without these overheads.  By the end of 2020, we were in a very strong financial position and as we proceed on this trajectory, we’ll continue to expand. Our key goal is to target profitability in Riyadh, Jeddah, and Dammam within 3 years.”

11- Used cars, especially when driving popular SUVs, are not a “green” offering. Isn’t the trend for companies and consumers to go with sustainable mobility?

“Car producers are certainly moving towards greener, more environmentally conscious models and the introduction of Teslas has changed the landscape significantly. However, the cost of these models is often outside the range of those looking at the used car mid-range level. However, customers are looking at smaller engines while searches for hybrids are increasing on the site. As of today though, the EV sector only represents 5% of the market and it will take a few years for that to trickle down to the mass used-car market. We help consumers sell both EVs and hybrids and have seen more and more of them on the platform in the last year.”  

12- Can you describe your financing offering?

“Buying a car from another private individual allows you to skip the dealer’s inbuilt margins and when you add the third-party financing, this can become cumbersome. Fortunately, CarSwitch does all the heavy lifting for you. Starting from our mobile app where we have introduced a 2-minute financing pre-approval facility so you can get pre-qualified online and know which cars you are eligible for. On top of that, the app also tells you what your Equated Monthly Instalment (EMI) will be based on your chosen down payment and loan period.

“When it comes to securing the loan, we handle all your paperwork and get you financing from one of the approved lenders in the UAE. So, overall, we have digitized a difficult and time-consuming process and made it extremely user-friendly.”

13- Who is your target group?  

“CarSwitch helps everyone to sell or buy any type of car. The age group typically falls between 25 to 65 and skews slightly towards a male audience. Both buyers and sellers do reflect the socio-economic patterns of the UAE and so they fall at around 20% nationals, 80% expats. Around 40% of this expat group are from Asian countries.”