Thursday, May 11, 2023
HomeTechWhy the value of my second-hand Toyota has risen tenfold in Japan

Why the value of my second-hand Toyota has risen tenfold in Japan

For over seven years and just under 100,000km, we have driven our Noah hybrid like the unflashy workhorse Toyota intended it to be. The exterior of this five-door minivan bears the scars of country scrapes and urban dings, while its interior is a rich collage of smears and spills.

Ordinarily, the trade-in value of our weary but operationally rock-solid friend would be something close to worthless. In Japan, the costs of meeting the country’s rigorous shaken test — the 60-part roadworthiness checks carried out by government-authorised inspectors every two years — can ratchet into the thousands of dollars beyond a car’s seventh year (a deliberate policy to increase new car sales). So a vehicle’s appeal on the local second-hand market plummets.

But, as our Toyota dealer confirms, these are far from ordinary times. So much so that the mobile-phone business of the troubled Japanese tech group SoftBank, seeing a business that can offer immediate growth, has thrown its artificial-intelligence prowess at the unflashy second-hand car game.

It’s a strange moment and hard tech lies at its root. A global shortage of semiconductors remains unresolved, together with broader disruption in the parts and materials supply chain, particularly aluminium. As a result, says our dealer, if we ordered a brand-new Noah today it might arrive 13 months from now, if we are lucky.

The silver lining is that, whereas our car’s previous trade-in value might have been less than ¥100,000 ($700), this dealer will now offer us 10 times that if we commit to buying a new Noah when it finally arrives in late 2023. In addition, we get to drive the old Noah until the new one arrives, and its inflated value stays fixed no matter how many extra miles we put on the clock — or how many dings we add. Because not only have used-car prices surged roughly 30 per cent in a year in Japan, but — within that spike — older cars like mine now have a domestic value that they could have never commanded in the past.

This is what attracted SoftBank, whose $100bn technology Vision Fund backs Carro, a Singaporean start-up that deploys AI to calculate used-car values. Previously, used cars in Japan were mostly sold to emerging markets, where vehicle histories matter less. (Last year 1.2mn cars were exported, with Russia the main destination before its invasion of Ukraine.) Now cars like our trusty Noah are more likely to spend the rest of their lives in Japan, where these histories matter a great deal more. As a result, technology with the ability to quantify this history has a tangible value.

Last week, using Carro’s software, SoftBank mobile launched a service where customers looking for a used car can pay a flat subscription rate to lease and drive one. The AI tailors the fee to the specs, pricing and histories of the cars required — the main challenge being that of matching used cars to customers previously accustomed to buying new. All those bumps and spills that wouldn’t have mattered to the valuation of our Noah before will now be evaluated by artificial intelligence. And SoftBank will take its cut for bringing buyers and sellers together on its platform.

Initially, this will be for businesses, but the plan is ultimately to extend it to individual customers. In the process, SoftBank’s tech has laid down a standard that this newly emerging market must meet. Tech may have upset the Japanese car industry, via the semiconductor shortage, but perhaps it has also found a swift solution.

Leo Lewis is the FT’s Asia business editor

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