21 February 2023
By enhancing consumer involvement and providing round-the-clock customer care, artificial intelligence (AI) is transforming customer service. Along with improving customer service, it also increases brand recognition and client loyalty. Today’s consumers connect with companies across devices, necessitating specialized touchpoints to improve the customer’s decision-making process. Fortunately, the automotive industry is finally implementing these services.
To find out how AI and automation has played a big role in meeting consumer demands in the automotive industry, DigitalCFO Asia spoke with Ernest Chew, Chief Financial Officer of Carro to get his insights and perspective.
AI & Automation Being A Part Of Carro’s Business Foundation
Carro started with digitalising the automotive ecosystem. With increasingly more data to crunch, it then became easier to AI-enable their business through machine learning. Data-driven decision making has always been a critical part of Carro’s DNA.
“We recognise the importance of automation to scale. However, it’s even more important to understand what we are trying to achieve via automation,” says Ernest Chew, Chief Financial Officer of Carro.
Automation is a process to take out inefficiencies and fix processes. If businesses automate inefficiencies without fixing or optimizing processes, then they will also be multiplying the inefficiencies. Ernest Chew, Chief Financial Officer of Carro also advises that if automating is more expensive than manual and yet does not deliver the productivity gains, then there is no business case for automation in that particular process. So, it is incredibly important to “simplify, optimize and then automate” – in that order.
Technologies In Enhancing Business Productivity & Increasing Profit Margin
Carro does not look to challenge the traditional automotive retail business. Their mission is to improve an age-old business model and build trust in the automotive ecosystem, digitally. They leverage big data, AI and machine learning to deliver best customer experience whilst building an effective, operationally sustainable business model.
“We take ‘gut feel’ out of the equation and introduce years of combined human experience into proprietary algorithms, systems and models.”Ernest Chew, Chief Financial Officer of Carro
Carro automates some of the decision-making to reduce chances of human mistakes and fraud, which is prevalent in the used car industry. Carro applies these big data and AI-enabled processes across the buying and selling of vehicles, credit decisioning, amongst others. As a result, whilst other online automotive retailers and marketplaces are struggling to be profitable, Carro has been EBITDA positive and see a clear path to becoming even more profitable.
Some Of The Key Financial Market Trends Of 2023 In The Automotive Industry
“We expect the used car market to continue its stable growth underpinned by growing used car vehicle population and structural improvements in the used car-to-new car ratio,” says Ernest Chew, Chief Financial Officer of Carro.
The used car market in Singapore was estimated to be worth USD 40.03 billion in 2021 and is anticipated to grow to USD 51.43 billion by 2027, registering a CAGR of over 4% during the projected period (2022 – 2027).
The COVID-19 pandemic had a conflicting effect on the market; in 2020, lockdowns and limitations caused the market’s demand to cease. The pandemic did, however, have a favorable impact on consumer behavior, favoring automobile ownership over public transportation and potentially increasing the market for secondhand cars. By the first half of 2021, used car sales began to increase as the bulk of those were people who could not afford a new vehicle. Due to that, many consumers began leaning toward the next best option available, which is buying pre-owned cars.
In the medium term, elements including rising purchasing power and the ease of obtaining financing are anticipated to favorably impact market expansion. Further, increasing digitization, internet use, and the number of online participants are projected to play major roles in increasing used car sales because they have made the process of buying and selling used cars generally simple and quick.
“The new car market is also likely to grow as the supply chain is being restored and the macro-economic situation improves post easing of COVID-19 restrictions. However, continued interest rate rises may throw a spanner in the works,” says Ernest Chew, Chief Financial Officer of Carro.
Recent occurrences like the nationwide increase in used car prices as a result of increased COE rates and the breaching of the USD 100,000 COE threshold for large cars are indications of a weaker market. These situations are requiring dealers to maintain pricing on automobiles they have purchased at high market prices; if they persist, these variables are thought to provide possible difficulties.
Also, the expansion of value-added service offerings and the diversity of financial companies that offer loans for used automobiles will support the expansion of the region’s used car industry. But the higher interest rates might discourage some prospective buyers, slowing the market’s expansion.
Keep Track Of Areas That Can Be Improved Further With AI & Automation
The team, at Carro, has done an incredible job of building high-impact dashboards to monitor various business performance, profitability and productivity metrics. These dashboards have proven to be immensely insightful to the live performance of the business.
“Gone are the days where we wait 10-20 days after a month end to know how the business is tracking – we now get it live,” says Ernest Chew, Chief Financial Officer of Carro.
The real-time analytics offered by the high-impact dashboards saved Carro from having to spend a lot of time looking up information. With the click of a mouse, real-time analytics are now accessible, and these dashboards communicate data in an aesthetically beautiful and understandable environment, making it simpler for the team to evaluate the data, identify the good and the bad, and take appropriate action.
The Effects Of Skill Gaps On Further Business Expansion In APAC
Where others have overhired and/or spent incredible sums to hire talent, Carro believes that it is very important to be disciplined and prudent around hiring. Getting the right people, rather than chasing over-rated perceived skill sets is more important.
“What makes a great hire is often not what one writes on paper, but the passion, hunger and growth mindset to deliver their best, in the most practical manner. So, yes there’s a gap for high quality candidates, but they are not defined by whether they are digitally savvy or not,” says Ernest Chew, Chief Financial Officer of Carro.
These are some of the ways AI and automation has benefitted the automotive industry. However, it is important that many keep in mind that despite its wonderful benefits, without a proper strategic plan and the necessary manpower, making that move (automating business processes) might cause more harm than good. On top of that, the market for used cars might see a steady increase and this would push more companies to want to automate their processes to meet consumer demands. With all these in mind, it is that companies have projected goals in mind that they would like to achieve so that they can better keep track of their automation progress.