New research shows the United States is a model for how used vehicles can be a profitable industry growth segment for other places in the world, including the use of certified pre-owned programs.
Strategic consultancy firm Frost & Sullivan cited four reasons why the used-vehicle market in Latin America is “transforming.”
While noting factors common in the U.S. marketplace, Frost & Sullivan projected the total used-vehicle market in Latin America will reach 22.4 million units in 2022, exhibiting a compound annual growth rate of 3.4 percent during 2016 through 2022. The four reasons for that sharp rise include:
—OEM collaboration with franchised dealerships in order to resolve informality and lack of financing, improve their brand image and equity, and increase new unit sales as customers can use their old vehicle as partial payment.
—Deployment of new apps, mostly in Mexico, Brazil and Argentina, which create opportunities for independent dealerships and individuals selling their vehicles.
—Online disruptors partnering with OEMs, dealerships and financiers to create shared value through data such as customer preferences and new-model reselling patterns
—OEM efforts to promote used hybrid and electric vehicles through certified pre-owned programs designed to ease battery life anxiety among buyers.
“The Latin American used-car market is primed for online disruptors that can offer financing, easy and friendly processes, and limited warranties and maintenance plans to differentiate and add value for customers," said Frost & Sullivan mobility industry analyst Hernan Cavarra.
“The focus of these startups will be to remain competitive on pricing by keeping operational costs low,” Cavarra continued. “Taking advantage of the learning curve from similar business models in the U.S. market, online businesses can expect success in the medium to long terms."
Frost & Sullivan also mentioned several innovative players are helping accelerate market growth in peripheral used-vehicle markets like Peru and Mexico that are “informal, unprofessional, and poorly regulated,” and in large markets like Brazil, where oversupply of new models due to an economic crisis and influx of low-cost Chinese units, restrain used-vehicle sales.
—KAVAK offers end-to-end buying and selling of second-hand vehicles in Mexico along with the commitment of selling the vehicle offered by individuals within 30 days.
—InstaCarro.com has a disruptive business model that promises to sell any used vehicle in an hour and a half or less to any of more than 1,500 dealers that buy it through an online auction. In its first year of operation, the company reported more than $32 million in revenue.
—Localiza, one of Latin America’s biggest car rental companies, has a used-vehicle division that uses smartphone apps, offers good financing options by taking the customer's used unit as part of the transaction, and provides insurance and regular maintenance services.
—Superbid, which specializes in online auction sales, also offers fleets.
—Nissan Mexico offers almost-new and used vehicle eCommerce through its listing-driven website, and has a 154-checkpoint CPO program, financing, warranty, on-demand maintenance and services features, and original spare parts.
“Government regulations, OEM CPO programs, active participation in the market through franchise dealerships, and startup apps for 100 percent used-car sales processes will build trust among buyers and boost confidence in used cars,” Cavarra said.
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