Autolab – a New Choice of Auto Repair for LatAm Middle Class2021-10-02 | Santiago Pérez
Latin America consistently ranks among the top developing country markets of motor vehicles, with 350 motor vehicles per 1,000 people in Brazil in 2019, compared to 200 in China in 2020. Bogota, with a population of just over 8 million, has a staggering 2.3 million motor vehicles. A large motor vehicle market also means a large market for auto repair services. Autolab, a Polymath Ventures company, is Latin America’s leading auto repair and parts platform is committed to achieving transparency, standardization, and convenience in the category.
In this new blog post, we talked to Salvador Zepeda, also known as Chava, the co-founder, and CEO of Autolab, – Mexican with a master’s degree from Stanford University and passionate about entrepreneurship -, who has spent the past 6 years understanding how the category works, its needs and most importantly its potential.
The opportunity in Latin America
The current auto repair market landscape in Latin America is highly fragmented. It is a $74 billion annual market, with an estimated 839,000 auto repair stores. 81% of them are small independent stores or small chains, and only 6% are dealerships.
Traditional dealership shops located at the top have little competition, and despite being able to offer original parts and high-quality service, they have rather high premiums. For the average independent repair store, the competition among them is highly homogeneous. In order to attract more customers, they must offer lower prices and a wider variety of services, resulting in lower quality of parts and repairs. In addition, these independent shops are known for their lack of transparency and low trust.
Latin American countries are developing countries with rapidly growing car ownership, so the auto repair market has great potential. The industry’s acceleration is mainly driven by two factors; the healthy recovery of the auto market and the growing base of independent auto repair shops. The recovery of the auto market is directly connected to the reopening of cities and revamp of global economies; according to Statista, the global automobile sales average is 70 million units per year. At the same time, users reluctant to buy new cars are shifting their buying behavior towards boosting the life and trade-in value of their vehicles. Latin America is well-positioned to evolve this industry, due to the high concentration of owned cars.
On the other hand, many of the independent shop owners in Latin America are also repair workers, who lack the awareness of marketing and innovation to boost their businesses to achieve incremental growth. Through design thinking and quantitative research, Zepeda and the Polymath team found that the biggest problem of the traditional auto repair model in Latin America is the mistrust and loss of efficiency caused by the information asymmetry between service providers and consumers.
As the company moves forward, its leaders identified the opportunity around the specific target audience they are trying to impact. Dealerships seem to have strong resources to support their entry into the competition, but in fact, their target customers are not the same as Autolab. Most middle-class Latin American car owners only go to a dealership for maintenance during the warranty period. After their cars are out of warranty, they generally choose independent repairers with more affordable prices. For this reason, dealerships want Autolab to undertake the repair business after the warranty period. This could prevent the low-level service of individual repair shops from destroying the reputation of their products. In addition to dealerships, Autolab is also trying to cooperate with some errand platforms, which will undertake the transportation of cars between homes and repair shops to strengthen Autolab’s door-to-door service capability.
What is Autolab?
Autolab’s story starts in 2013 with the ideation process led by Polymath Ventures around labor in Colombia. With a 30+ million person strong Colombian labor force, only about 50% of workers have formal jobs. About 5.3 million are informally employed, meaning without a legal employment contract, while 14.3% of the population is unemployed.
At the time, the team realized that if the market was too small for employees to grow, they would just have to open the market up and make it bigger. Through a process of elimination and deep user testing, the team found that the auto repair business in Colombia was ripe for disruption through scale. The team prototyped “Autolab”, a full-service auto repair center that excelled in professionalism, and technical ability. And yes, they fixed a few cars.
The company was officially launched in mid-August 2014 with 15 members. Three years later, its turnover exceeded $806K US and it had more than 70 employees. Today, Autolab has 50+ shops in Colombia, with a presence in 13 cities. They recently launched their operation in Mexico with 2 shops, and a B2B business model in Colombia with the aim of transforming this segment through a disruptive tech solution and superior client service.
Autolab has built a platform that unlocks incremental growth for independent auto repair shops while providing trustworthy and affordable solutions for car owners. Currently, there are over 500,000 independent auto repair shops in Latin America, most of them with limited growth opportunities due to a lack of knowledge in customer acquisition, client management and operations, and limited access to capital. Autolab is currently the largest chain of auto repair shops in Colombia with a distinctive business model designed to provide a best-in-class experience and dramatically improve the profitability of the shops in their network, up to a 700%+ increase in profit.
For the car owners, Autolab designed a unique experience that solves their unattended needs and surpasses their expectations in service and transparency. Their service model includes a website and web app for instant quotation and notification of repair progress based on the shop inputs. To ensure the highest quality standards, their operation team monitors the overall evolution of each service from their control room.
Overall, Autolab achieves a four-way linkage in its platform business model. The consumer first checks off the required items, then get a quote, and chooses whether they want a pickup and delivery service, service at home or to go to the shop. After receiving the car from the owner, the Autolab shop network performs the repair work supported by the existing technology. For the spare parts, Autolab has built an affordable auto-parts procurement network to ensure the price is competitive and the delivery is timely. In addition to providing technical support and strategic direction, the company has set up a remote service center to handle both store issues and customer feedback, effectively facilitating the integration of the four major players on the platform.
What is next for Autolab?
COVID-19 impacted all aspects of Latin American socioeconomics, but in Zepeda’s view, the pandemic brought more opportunities to Autolab’s business as well. The regular epidemic prevention measures require reducing the use of public transportation, which also means weakening economic activities and reducing new car sales. These all greatly increase the use of older vehicles, as well as the demand for auto repair. The pandemic also has a profound impact on consumer behavior. People are forced to bear the cost of adapting to the online business model and become more accustomed to using online services instead of in-store visits.
As an Internet company, Autolab’s mature and efficient platform model not only ensures its “survival” in the post-pandemic era but also has a promising future for growth. The milestones achieved over the past 12 months reflect the massive opportunity for Autolab and the overall industry. From August 2020 to July 2021, Autolab grew its shop network by 7x and revenues and shop visits by 4x. To extend its operation and impact, Autolab continues its growth with a talented team of 80 people under the leadership of Salvador Zepeda and Andrew Hallman.
In 2021 the team continued pushing for new goals, first, they launched the operation in Mexico with 2 shops. Also, under the leadership of Andrew, the team is now launching a B2B2 service for fleets
Autolab’s business DNA is essentially about creating value for users with data and technology, so the company is also considering refining and improving existing technologies and algorithms in the auto repair industry, to apply them to more scenarios, such as expectations for retail consumption.