At car auction houses, AI is a tool, not a worry

A number of used-car auction houses are dismissing the reliability and dependability concerns of some about artificial intelligence — not to mention the Elon Musk/iRobot-inspired worries about it replacing humans and taking over the world — to embrace the technology that helps hone the vehicle imaging and inspection process.

Michael Pokora, senior director of research and development at used-vehicle online auction company ACV Auctions, which last month acquired Paris-based AI solutions company Monk for $19 million, said the anxiety is unwarranted. Machine learning is not meant to replace humans in the vehicle inspection equation, he said

"It's just a tool," Pokora said. "It's not this buzzword. It's not something that's going to just replace humans every day. It's something that's going to help us chew through all this variation, all this data, get it right the first time."

Monk executives told Automotive News that users can use the company's guided photo capture on a smartphone to remotely take pictures of vehicle exteriors, which are then analyzed for damage, such as scratches or dents. The goal is to get a full scan of the car and a report on it in 60 seconds or less.

"The fact that my teammates here want to get this down to one minute going around the car — that's pretty efficient," ACV CEO George Chamoun said.

Efficiency, speed, streamlining — these all are words auction houses are using these days to attract buyers and sellers to their products. When the COVID-19 pandemic accelerated an industrywide shift to online operations, those companies weren't unaffected — and their interest in mobile and AI-guided imaging piqued.

Speed is crucial, Chamoun said. In fact, Monk said it plans to evolve their photo capture to a single short video that can be analyzed.

The technology application can be used when dealers want to inspect cars they've purchased from their consumers or when a rental car company wants to know what's going on with its fleet, Chamoun said.

ACV, which crossed the 2,000-employee mark this month, said the AI-enabled self-inspection platform is live with initial customers in Europe. Monk technology integrated with ACV will be available in the U.S. this year, ACV said.

AI-enabled auction assets caught the attention of Manheim in 2018 when it partnered with Fyusion, an automotive imaging and damage detection company. Manheim, the largest auction network in North America, announced it acquired Fyusion in January 2021.

This month, Manheim said it is adding Fyusion-powered mobile imaging to all of its locations. That's not all: Manheim also installed its first fixed AI-driven imaging equipment at its Minneapolis auction location.

"We're bringing in computer vision and artificial intelligence to now automate the condition report-writing process," Manheim President Grace Huang told Automotive News.

The process uses a gantry, an overhead structure with high-resolution cameras, which works like a drive-through, Huang said. Vehicles will be photographed as they're driven through the gantry, and the process gives a user two sets of output — the vehicle images and, in the future, an automated damage-detection layer on top of those.

"Once the gantry is built, it takes the images and then the artificial intelligence can be layered on top," Huang said.

Human inspectors will still double-check to verify vehicle conditions, Huang said. There are some images that can't quite be captured — such as hail damage, Huang said.

"But for the large damages, the most common damages, it's actually quite accurate already," she noted.

The technology is advantageous because it may help root out damage "false positives," according to Manheim. Because the pictures are taken from multiple angles while the vehicle is moving through the gantry — producing a 3D image of the vehicle — such phenomena as reflections can be better recognized, Manheim said. With 2D pictures, a reflection might be misinterpreted as damage, the company said.

Manheim will deploy more gantries over the next 18 months to two years, depending on how quickly supply chain issues affecting cameras and microchips level out, Huang said. Some Manheim auctions will get one gantry, some will get multiple gantries and some won't get any.

But Fyusion's imaging software is at all Manheim locations already via handheld devices. Auction locations that don't get an AI-enabled fixed gantry will still use that 360-degree imaging from Fyusion.

Manheim did not say exactly how much it's paying for Fyusion or each gantry, citing ongoing costs, but said it invested $300 million in the last three years to improve vehicle information and the Manheim Marketplace.

On a broader scale, investments in AI technology speak to how the industry is becoming more competitive. Auction houses want to differentiate themselves from each other, especially in an increasingly online world where buyers and sellers don't always see or touch the cars and dealers rely heavily on inspections being accurate.

"That's really the impetus behind these companies investing in this AI and in these imaging technologies," Stephens Inc. analyst Daniel Imbro told Automotive News. "It's to better give the buyer or seller comfort and confidence in the estimated repair costs so that they can bid more accurately and more fairly for each vehicle."

Tapping into machine learning data is not new to the wholesale industry, but the practice accelerated during the COVID-19 pandemic as a larger chunk of vehicle bidding shifted online.

In 2018, KAR Global was running physical auctions through Simulcast and suggested using millions of data points it had to help consumers make better bids online, Imbro said.

KAR Global invested last year in Ravin AI, which offers, among other things, an AI-assisted and web-based mobile app that can remotely scan vehicles and detect damage.

It's early to know how accurate the data is, Imbro said. He doesn't think the technology provides enough accurate readings to replace the role human inspectors play in the process.

But the more data points the auction houses gather and put into their systems, the smarter their output becomes, Imbro said.

"What that's leading to is increased confidence from the bidders, and ultimately, it's helping drive increased online penetration within the wholesale auction industry," he said. "I think it's leading more and more buyers to being comfortable buying online."