#34 Autotrader CEO: Chinese Car Growth is "Mind-boggling"

BBC-podkast on suurin erilainen. Täällä on tullut. Täällä on tullut. Täällä on tullut. Täällä on tullut. No, much, much quicker, much, much quicker. I think it is mind-boggling, if I'm really honest. If you think many of these brands had invented the market, you take someone like a BYD, which has probably got the greatest share at the moment of many of the Chinese producers. They sell electric vehicles, but they also sell a lot of hybrid products. They've achieved in a year what probably took a company like Tesla six to seven years to achieve. I mean, it is the graphs are really, really steep. You've got a point now where many of them in the last few months are upselling 5% of the new cars, 6% of the new cars in the UK. That's equivalent with many of the brands that you would, you know, that you grew up with and knew and loved and they've done it's really, really quickly because their price points and electric vehicles are a bit easier to build in some way. Most of the cost is in the battery. Chinese government made a big point of investing in batteries, so it's quite cost-effective for them. And actually, the British public, what we thought might happen is the British public love their cars. I've come to love my cars being in the UK now, fraighting years as well. We thought they'd have greater attachment to brands than what they've shown. And actually, when you look at what people think about when it comes to an electric vehicle versus what they think about when it comes to an ice vehicle, the brands are totally different. If you think of it as a bubble chart, the bubble charts are really big on brands like MG, Armada, J-Coup, BYD. On the other side, they don't even appear. It's BMW, it's Audi, it's Volkswagen, it's, you know, Vauxhall and many of those brands. Explain your bubble chart there. So what have we got on both sides? Think of it as a person's brain. Yeah. And how they're thinking about their new car purchase and what's kind of at the front. No one's thinking about I'm only going to buy a VW. They tend to have, you know, their brain is made up of, well, maybe I'm going to think a lot about VW because I'm currently driving one, but I also consider a BMW and an Audi potentially. Think of that on one side when it comes to ice. When you look at that brain and it comes to an engine. I can buy a sheet. No, no, no, it's all right. A broken link. No, we're all involved in this link of these days. Yeah. So petrol vehicles. When you then take the brain of a person thinking about electric vehicle, which might actually be the exact same person, those big bubbles are new brands, like I've seen an MG. I've seen this J-Coup product and a motor product. That brand loyalty that you used to have has kind of fractured a little bit when it comes to this totally new product. Even though it's still a car, it is quite different and your choices are quite different. What are the consequences of that for the car industry? Well, I think if you speak to the industry, a lot of the cars that we sell in the UK new do come from overseas countries. We've seen the rise of the German brands over the last 10 years. In that sense, it's a shift from one manufacturer, potentially, to another. Now, those manufacturers are still very much committed to the UK market. It's the second biggest in Europe and a very, very profitable market for them. So they're not walking away any time soon. I think when it comes to manufacturing in this country, which includes cars that we manufacture to export out, I think it does start to make it a little more challenging because these electric vehicles, as I mentioned earlier, the battery is like a big, big part. You know, a third to half the cost of the vehicle and you really need those being produced locally. You need the R&D locally. You want to be supporting that industry so you're really good at building highly efficient batteries that can give a good range to the vehicle. And I think you have seen that's putting pressure on manufacturing in this country because a lot of that manufacturing was dedicated to some of the combustor, you know, petrol and diesel vehicles. Do you think those traditional car companies, whether manufactured here or around Europe, can compete with those Chinese brands that have captured our imagination in a very different way? Yeah. I think the answer is yes. Whether every single one of them would be able to, but these are some of the strongest brands in the world that you're talking about. They build cars that people find really attractive with good technology in them. They're well engineered, they've got safety records that make people comfortable. So at the moment they are competing reasonably effectively. What they need to do though is they were always competing with petrol and diesel vehicles that let's say might have cost on average £30,000 or £25,000. Their electric equivalents are very often £35,000. That's the problem. They need to be able to get that cost back down to around where their petrol and diesel equivalents were. If they do that, I think they'll be able to compete quite effectively. But that's a lot easier said than done. And I can't pretend to say that I know how to run a factory or get the price of an electric, the cost of an electric vehicle down by that sort of quantum. But that's really the thing that they've got to come to terms with. And they'll be able to do it as their factories ramp up and move away from petrol to diesel to start to produce a lot more electric vehicles. That tends to make the equation work a little bit better. And then it is back to getting the battery cost to work. And on this trajectory, what proportion of cars on our roads would you expect to be Chinese cars in a year or five years? It's still a relatively small percentage actually. So if we said those manufacturers might count for 15 to 20% of new cars this year, maybe even a little bit more than that. That's on two million sales. That's 500,000 cars that's going in this year. There are 35 million cars on UK roads. So it takes quite a long time for the, they'll account for a big percentage of the new car sales potentially over time. But for that to feed into the 35 million cars that are on our roads today, which range from one year old through to 20 years old, those changes tend to take a bit longer. Same is true of electric vehicles generally actually versus petrol and diesel. There will be petrol and diesel cars around for a really, really long time because you can't replace 35 million vehicles that quickly. Just while we're on electric vehicles, generally subsidies that we're announced last year, then we got around the budget, the announcement that electric vehicle drivers will start effectively paying a road tax in a few years time. VAT questions around charging and the like. Does it feel to you like there's a cohesive strategy for electric vehicles in the UK? I think it's hard to say there is, if I'm really honest. I think there's definitely regulation that says we want to get to selling only new electric vehicles, zero emission vehicles by 2035. So that bits really, really clear. What's been difficult is the support for people to get there has really been, or the obligation or responsibility to get there has really been pushed on to the people that manufacture those vehicles. Now you might say fair enough, but I think there's an assumption there that these vehicles are profitable and really commercial for them to be able to sell. And at the moment, that's a little bit challenging because they've not necessarily had time to get down the cost curve. So from a new vehicle perspective, I think, and even maybe a used vehicle perspective, if we want to get to those sorts of targets, if we want to get to a fleet of vehicles on UK roads that are less impactful on the environment and transport accounts for a quarter of carbon emissions, then there probably needs to be more support around buying the vehicles, more support around investing in infrastructure. And those things have kind of chopped and changed a little bit. The support's been there and then it's been slowly withdrawn. We're not really at a time where that support should be withdrawn at the moment because the target numbers are actually cranking up over time, not getting easier. And just how does that tell you the cost of vehicles? With what you said before about European manufacturers liking the UK because it's a profitable market. Yeah. It might sound like the scope there for some of these pressures on manufacturers because it's more profitable to sell a car here than in other parts of their market. Yeah, although at the same time, they're not having the same pressure put on them by other European markets to get that mix right. In the UK, just to give you an example, and this will make it very easy for you to understand, if they don't sell, say, 33% of cars as being electric vehicles this year, for every car that they sell over, they might need to pay a fine of up to 15,000 pounds. That pretty much makes that car not profitable to sell. They can also, it's 33% of cars are electric, they're still also able to sell a lot of petrol and diesel vehicles, which are profitable for them and it is worth saying. They're also a lot, lot better for the environment than petrol and diesel vehicles last year, the year before that, the year before that and certainly 10 years before. Just want to move on to another aspect of your business that has got headlines in recent weeks about the reviews part of it. So there's been a competition of markets authority announcement that they've launched an investigation into five companies about the reviews that are on those companies website into as they put it fake and misleading online reviews. And one of those companies is Auto Traitor. And actually another of the companies is the business that Auto Traitor use FIFO to be able to manage some of these reviews. So just firstly, your response to the situation, you've got the competition of markets authority investigating you for the reviews now. Yeah, so as you will have understand that it's a hard one to really talk a great deal about and that's because we haven't really other than we've worked with the CMA before we've worked with them around online content and reviews. It is obviously news to us in some sense and we really need to engage with them and understand what they're looking at. I mean if you look at the letter and what they've said it's different for each of those companies. In AutoTrade as case it talks about how reviews are moderated. As you said we outsource that to FIFO but there's a question as to if a review is moderated or not accepted you know how do you treat that review when it comes to the online calculation of it. So we really need to dig into it and understand a little bit better. What I would say is as a business if you came and walked the halls of AutoTrade and not that we have halls because it's all open plan but if you came and walked around we take ethics, integrity, doing things in the right way really really serious and that will always be true. It's always been true as well but we've really it's something that we've just got to engage in and understand it better. Is that engaging happened? Is there a constant dialogue with the right answer right now given the big headlines that come out of an announcement like that? Yeah I mean as soon as that announcement comes out then a process does get started and that process has started but it's nothing really that you can that I'd be able to comment on at the moment just because you know we need to really understand where they're coming from and what they want to understand and what data that they need and and then at some point we'll be able to comment on it. Historically then just before this investigation it's something you decide to outsource the management of those reviews. Yeah why would you do that because a lot of people would see AutoTrade I mean I know it's associated with the magazine going back decade but it's a tech digital online company. Why not manage that stuff yourself? Partly because we're a tech digital and online company what we're really really good at is software engineering building big systems that scale a lot. When it comes to managing reviews that is a bit of a job in itself it is about dealing very often with consumers manually backwards and forwards accepting reviews asking for them to be changed. We took the view that actually as the person publishing the reviews we would take greater comfort in knowing that there are experts in that that business just like we're experts in running technology and having a big brand better to work with someone that can make sure that that is independent it's dealt with where not in any conflicted situation between our customers or our consumers and their experts in that in that space. So that's the decision really really. You think you might reassess that? I think it's just too early to comment on all of that stuff to be honest. I mean I think there will be people there is more and more the competition markets authorised nothing to do with competition they've had their powers expanded now into the online space and reviews particularly. I think you really need to see how does that actually play out and what does that mean for how we manage reviews. As I said we'll come back to a really simple thing what is the right thing to do for people that are buying cars and people that are reading those reviews and what's fair to because I guess that's our concept of and if people have a glance at trust pilots or whatever you can always find some of this stuff but you can see that there's occasional bits pockets of frustration that a review that people have put down for a dealership somewhere hadn't made it through. The concept of oh a bad review not making it through to the place where people feel it should sit. It's not where we should be is it. I think it's really hard to talk a lot around this fun because we need to give the CMA the chance to talk about what are the things that they've got concerns about and how we might do we need to change something. When it comes to moderation and I can only talk for auto trader to a relatively small number of things where a review might end up being moderated or be things like use of profanity use of someone's name use of personally identifiable data there are some things that you simply it will be it will not be right to publish on the the internet the question is well and you know do you go back to the consumer and say okay we haven't accepted it do you want to re-review which is something that we do but again it is super hard to comment too much on it. And brought Nick out a little bit talking about the technology advances artificial intelligence and you know plays into the customers you know desire for truth that sounds a bit more sort of high-falute in than it is. But people are questioning a lot of things these days. Does it make it harder this environment that auto trader are in to make sure that people are trusting what they're reading is based on a very true experience. I think no I don't think it's making it harder if I'm really honest I think partly down to the culture point that I made where we're really committed to doing the right thing as a business but if you couple that with some of the new technology that we've now got I think we're even better placed than we've ever been to be able to give people that truth. We're always independent right at the start I talked about the fact that we've got you know 14,000 customers that are selling cars on one side we've got 1.6 million people coming to look at them every single day and we sit in the middle now if we want to run a business well and that marketplace really really well you need to be balancing both sides of those at the end of the day we need the car buyers because if the car buyers aren't there then the people selling those cars aren't going to be there so we have a very natural incentive to give people an independent view a rich view and pour as much engineering as we possibly can which we do in this country in just cars in the UK we have about 400 people in our product and technology organisation that all they do is try and answer that question that you've asked there and now we've got tools like large language models we've got AI we've got machine learning so we can tell you what your car's worth we can tell you whether what the car that you're buying there's a little price flag that will tell you is this overpriced underpriced that's all completely spec adjusted based on data that we've got from the factory when it was built actually there's I see all technology has always been enabled to our business you know when I first came 60% of the business was selling magazines now the trust that we could give you was about this big now there's a problem you're making a very small sign there is a very small sign for an ad in a magazine that's exactly right now actually you're getting rich artificial intelligence driven valuations there's probably six pages of information that you're getting on every single vehicle there's up to a hundred images rather than the postage style stamp so I have always seen technology and still see technology is probably that is the thing that can help us do a better job I have sort of an image in my head of tech bosses including yourself having to sort of form a form a line in front of investors trying to make the case that AI is actually really good for their business and isn't going to just swallow it up is that your share price is taken a bit of a hit of late is that because you're having to make that pitch more because yeah they're not convinced it's necessarily good for auto trader yeah I think to be really honest with you I think that is the big concern that investors have with many online businesses if you look at businesses like ours all over the world that are listed on stock markets if you look at those businesses that are selling software to other businesses so B2B businesses as well all of them have seen a really really big impact on their share price you know from around late last year and that's driven by a worry it's actually nothing to do with all those opportunities that I spoke about I don't think anyone questions whether we're able to do those things I think people are asking the question well does the window to the internet change from from what it used to be because the mind and change is there less effect to your that website that people might be used to scrolling through seeing pictures of cars that they might be interested in buying is there less traffic going to that no so I can only speak for our business I imagine there are businesses where there is a lot less traffic I mean BBC is in news and news can be summarized and anyone that's you know perhaps just providing car reviews that can be really well summarized by by LLM in some ways you know we even saw that impact on that industry from from Google we've never really seen that about 95% of our traffic will come direct to auto trader into our apps mostly that's how most people use auto trader or come into our website directly so we've always been a little bit different we haven't seen that change coming to the website directly so this is this is real nuts and bolts but you've got exactly the data on this because people will be changing their daily habits yeah are they going auto trader dot co dot UK are they going to an app that they've already downloaded are they searching it on Google are they going to chat GPT saying I need a new car what shall I do you can be an investor Sean because this is a question I get a lot the answer is half of people just coming straight into the app whether it's on their Android phone or on iPhone so that's the number one source of of how people use auto trader then the vast majority of the rest well half of the rest if you take the 95% or 90% comes through people typing in auto trader as a brand now not as many of us do the WWW no so very often it's just typing auto trader into Google or maybe typing into your browser that's that's the next biggest trunk and then after that you've got things like search engine optimising. people might be typing in, I want to find a forward voxel near me, and auto-trade will be the result that comes up because Google, even the LLM's now, now, - these lines, which models, which are GPT in the like. - Yeah, exactly. And they've all got to do the same thing. They're all trying to give the consumer the very, very best answer they can. And those models do work out, and Google works out, that actually for a question like that, auto-trade is probably the best and most trusted place to go. So that does account for some of our traffic as well. And that's the game you want to win, of course. There may be more competition down the road. And notice that Amazon autos, for example, is launching very soon. So if people, as they are, increasingly use these AI chat bots. Is it a tougher battle for you? Now, auto-trade is a dominant player in the field, so you will always be at this moment I'm there and there about. - Not how we describe ourselves, sure. - I understand. Big player, yeah. - Yeah, big player. I mean, I know in the industry would you stronger words as well, but is it a bit of a potential? Is it not a threat necessarily? But does it make it harder for you to get under the nose of people in the future? If we're using AI chat bots with a very conversational persuasive answer with a link, rather than, I hear the top five links on Google, I'll sort of choose the one out of those that I might want to choose. - Yeah, yeah. So let me start by saying that I cannot forecast the future. The second thing I'll say is I think AI is transformative to the world more broadly and internet businesses. There's no question as to whether these technologies are really going to be what the internet was to us 25 or so years ago. When it comes to auto-trade and it's worth actually rewinding, when we had a magazine people said, well, the internet's going to be the end of auto-trade, isn't it? Actually, auto-trade became bigger, stronger, more people were using it, using it more regularly, and you didn't have to wait at the news-age on every Thursday. So people thought that's quite good. Then mobile devices came along and every time we would ask ourselves, actually, is this a bit of a risk to auto-trade because there's a whole different way to access the internet more broadly and other apps potentially. So we went head long with always-lantin technology really heavily and really, really early. Now, when you look at how that transition went, more people used auto-trade again. We start to feel like at times we're running out of car buyers in the UK. More people use us again and more people use us more regularly because now it's sitting on their phone and it's really accessible. Then you had the machine learning the early days of AI. Well, might this change the way that people think about buying cars. Again, we lantin to it. It meant we can value car really, really accurately. We can value the car you're looking to buy. We can value the one that you're looking to sell. So that made auto-trade a bit stronger again. I think if I think about this new generation of AI, the large language models and look at how we're applying them already, I think it will be another one of those transitions where if we really, really lean into it, we can actually make auto-trade an even better place to come when you get to the pointy question of what car I want to find one of these cars. However, what I would say might change and this is true of Google as well, and people raised it at the same time as Google is when it comes to auto-trade has got 450,000 cars on it. Which ones do I want to look at? Well, actually, those sorts of things, I think the LLMs and Google today are going to be really good at answering those questions because they'll summarise all that content from all over the internet that will understand a whole lot about you based on all your previous charts. They'll probably give you a pretty good answer to that question. However, they'll find it much more difficult to give you a good example of cars that you can actually buy today. And that's how I think we end up working with the LLMs. When it comes to making that pointy decision, we've got the cars, you can trust the car and us because we're auto-trade and we make sure they're not fraudulent, we value them and we do all those things for you. And are you having to be more protective of that data that you have? You might have had anybody have a good old browse of your website, the magazine, although years ago you could have just flicked through, but now, actually, some of those potential rivals to you as well as facilitators. Facilitators of some of these sales would love to get their hands on all of that data you've got. Oh, 100%. 100%. Although, I think when it comes to many of the big models and even someone like Google, do they want to dive into the depths of UK car buying data? No, what really makes those business? Well, what makes those businesses quite powerful is they tend to apply patterns that work globally and they scale really big. That's how they've got to the enormous businesses that they are. The truth is a lot of the data that drives those decisions, you can't see on the website, you know, upwards of I wouldn't even know what the percentage would be. What you can see is a listing of a vehicle, but that's in-gatherer listing of a vehicle all over the internet people have had scraping technology for years and years and years. But I guess the likes of Amazon. And, you know, we've seen it Tesla starting to provide energy to households. You know, these companies that have already had pretty broad remits starting to delve into things that they haven't done before because they feel like they have maybe a bit more knowledge about the individual in a household. Is that something for auto trader? Could that change how auto trader functions? I don't know. Are you thinking, when you look out there now, are you thinking, "Blimey, there's an energy company there that we'd look pretty good alongside working much more closely with because the advance of electric cars, we're selling the car." Charging, yeah. All of that, you know, learning about a household and that data behind it, can that change the future for what a company like auto trader could look like? Yeah, I think it can. I mean, when it comes to competitors and big competitors like Amazon entering to the market, we before it's not to pay attention to that. I think what we tend to do in those situations, what we've always done is never just sit on our laurels and be complacent about the business and the position that we have and make sure that we're pursuing new technology, better experiences, you know, more trust from users or the right to deserve more trust from users every single day, regardless of what position we're in. So when I look at those new players, I think the right answer is to carry on doing those things. We could perhaps skimp on engineers and maybe not investors heavily in AI. We make the decision that despite the fact that, you know, 75% of all time spent in the UK looking at car stuff on marketplaces is spent on auto trader. We just don't take that for granted. If anything, the responsibility kind of weighs heavy on us and it pushes us to be very, very progressive of those things, whether there's a competitor, whether it's a big tech company, whether it's a local competitor, I still see our impetus to be exactly the same. I think understanding a bit more about people's households. I think we want to understand more about how they're thinking about cars because we're realistic that we know what we're really good at, we're really, really good at cars and we're good at new cars and we're good at use cars. That's a really complicated and big transaction for people. If we can just really nail that transaction because people find it complicated, risky, difficult time consuming. On the other side, car retailers are feeling like they don't necessarily have very big profit margins. If car prices fall, their businesses can find themselves in a great deal of trouble very, very quickly. There's quite a lot that we can go out and apply technology and automation to just there before we get involved in other aspects of people's lives, which they might not want us to get involved in. So your energy supply not coming from auto trade ready? No, not only times. We missed that headline as well. That's all right. I did notice when I was looking through chat GPT earlier and the apps that are in there. So there's these sort of agents that work directly with various other websites or apps as we would have known them. So you go through these LLMs as you say, is that something I notice auto trade in the United States has one for example. When you type in auto trader and it takes you if I wanted to buy a car in dollars in the US, then I could engage with the company in that way. Are you looking to do something like that here? Yeah, I'm OK. Yeah, I mean, you'd expect that based on everything I've said about technology, we're engaging with OpenAI, we're engaging with Google, Gemini, we're engaging with Meta as well and using all those tools both internally. We're looking and looking to build exactly the same thing as many others are whether that's the major change that we will as users just inevitably see in the coming years that actually whatever page we're on Facebook, we've had that little on WhatsApp, the little AI, little button that I don't know. It's a little button that I don't ever use, but it's hovered there for a while. Actually, at some point I could just be pressing that and going auto trader and that is how we enter the internet. Let me start by saying, do I think there is a future while we come to auto trader and you can press that button and use the full power of AI with all that data that you spoke about that only we have to help you make about a car decision. I think the answer is yes, at the moment we've launched some functionality which typically when you come to auto trader, you've got a cell want a BMW 3 series, I want a make and a model and then you get thousands of results. Now of course that's what we do because people don't want to get 50,000 cars that they're going to sort through web used and now we're going to go to the website. LLM now to allow you to say I'm looking for a family car, a sports car, and oh my God car, just if you just want to amuse yourself whilst you've got some spare time. So that's an example of how we'll increasingly AI enable auto trader. That will include at some point in free tech search if people want it. However, we have seen when we've launched that before with you know, neural linguistic programming, which has allowed you to do kind of tech space search. It's not really the way people want to search for cars, but we'll enable them to do that if they want. I think it tends to be because they don't want to, the only way that someone gets to choosing ACAR is by looking at all of them, but that's how they work out their decision. It's not that they're trying to work out which one's best. They might not even know which color they want, what wheels they want, what specifications are available, has a got some roof. You know, they tend to make that decision by looking at what's actually available. I think we could talk for a very long time about the car industry. It's what we do very well here in the UK, isn't it? Thank you so much for your time. Thanks for on. So that was Nathan Coe of Auto Trader talking to Sean. 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