Demand for used vehicles rises post floods in Chennai


CHENNAI: K Mahalingam, an IIM-Calcutta graduate managing the family business of selling used cars, TS Mahalingam & Sons, is experiencing a moment of truth about the demand a calamity creates for his kind of service. The ravaging floods that swept Chennai early December left in its wake a pile of submerged cars, now rotting in the garages for long repair or relegated for the scrapyard.

Scores of citizens whose cars have been damaged in the flood are making enquiries with used car dealers or even making purchases for personal transport in the interim, giving a push to in second-hand car dealing in a city historically trailing NCR, Mumbai and Bengaluru in this business. Used-car dealers say the demand pick-up follows a lull through the last two months when in cessant rains affected businesses and normal life. Now, the calls and conversion rates are promising.

“Their insurance claims are taking an inordinate time and people want interim vehicles. This is leading to a jump in preliminary calls and purchases, especially in the lower budget segments between Rs 2-3 lakh,” says Mahalingam.

Conversion rates at his venture have gone up by at least 30%, constrained though on used-car supply.

Mohammed JK Khan, a first-generation entrepreneur running Jee Jay Cars in Velachery, one of the worst-hit areas during the floods, is confident he will close December with an impressive sales record compared to the average of 20 sales, judging by the willing ness of prospective buyers to commit to a purchase. The used-car segment has seen consistent entry from large original equipment manufacturers targeting a burgeoning market that is increasing with lowering usage spans of cars.

Chennai, a market considered to be geared toward new cars than pre-owned ones, figures after National Capital Region, Mumbai, and Bengaluru in the pecking order of used cars businesses. Dealers are finding pockets of south Chennai, ad versely affected compared to the northern parts, just beginning to look for old cars, signalling strong underlying demand that might show up in the coming months.

“I see a spike in demand coming in a month from consumers as thousands of cars have been swept off the road and that void needs to be filled,” says Nagendra Palle, who heads Mahindra First Choice Wheels, the multi-brand used car dealer from the Mahindra Group.

Palle says the beginnings of this consumer demand are noticeable on their wholesale platform for used cars, where insurers auction off repossessed cars to car dealers or accident worn vehicles to scrap dealers.

“We are already seeing a spike of activity on the wholesale platform with insurers crowding it with flood-hit cars. These cars will be replaced in the market, and a good number could be second-hand cars.”

The luxury car market is part of this trend. German carmaker Audi has told ET it has seen a sales uptrend postfloods and that it will introduce an Audi-only exchange offer for Chennai customers to facilitate purchases of new cars.