As automakers continue to report plummeting April sales numbers, the factors triggering a slowdown in the new-cars market don’t seem to be weighing on the used-cars market. Used-cars sales crossed the 4 million unit mark in FY19, with it being 1.2x the size of the new car market. It is also poised to reach between 6.7 to 7.2 million cars per year by FY22, according to the third edition of the ‘India Pre-owned Car Market Report’.
“Growth in the used-cars market is between 3X and 4X of the growth in the new-cars market as the number of vehicles in the used-cars market pool is much larger than the number of new cars sold annually. The slowdown in the new car market hasn’t affected the used-cars market per se, as the consumer of used cars is slightly different from that of the new cars consumer. But, if there is a long-drawn slowdown in the new cars, it will impact the number of people who sell their used cars, which is the source of supply of used cars,” said Ashutosh Pandey, MD and CEO, Mahindra First Choice Wheels Ltd, at the launch of the the third edition of the ‘India Pre-owned Car Market Report’.
BusinessLine had reported on March 28, 2019 that the rise of online auto sales platforms like Droom and CarDekho, exceptionally high number of new car launches, fluctuations in fuel prices and increase in vehicle insurance rates is leading to a huge growth in the used car sales market.
According to the report released by IndianBlueBook (IBB), the industry first pricing and analytics platform for new and pre-owned vehicles, the Indian pre-owned car and associated industry is set to be valued at around ₹50,000 crore by FY22.When asked about the corresponding numbers for the new car market, Pandey told BusinessLine: “The new car market was 3.3 million in FY19. It is expected to grow at an average of 3-5 per cent per annum over the next 2-3 years.”
On the impact of the BS-6 implementation and Maruti’s decision to discontinue diesel cars, Pandey said: “We believe it will not impact the used cars market as the price differential between a BS VI vehicle and a used diesel vehicle will become far more significant, which will render the used vehicle a great buy for value conscious customer. Only if there is a general backlash against diesel, as has happened in Europe, or if government regulations discourage purchase or sale of used diesel vehicles, will the used car market get impacted in the short term.”
However, Pandey identified three critical challenges in the used car market: standardization of customer experience at dealerships- especially as the industry is in an early stage of getting organized- trust in pricing of used vehicles-which is subjective given the unique nature of each used vehicle- and low finance penetration.
The report has many key findings. Over 85 per cent choose a pre-owned car as a stepping stone to progress towards a new car. A pre-owned car traditionally opens the door for two-wheeler owners, looking to upgrade to a four wheeler, the report added.
“The movement of two-wheeler owners to pre-owned car owners and increased composition of value seekers would fuel the growth of the pre-owned car industry,” the report stated.