Organised used car sellers, which account for merely 15% of the overall pre-owned car space, have started seeing a dramatic rise in volumes. As the pre-owned car market continues to get organised, auto manufacturers are cashing in on the 36 lakh annual units of the Indian pre-owned car market. Mahindra and Mahindra’s (M&M) pre-owned cars business, First Choice, plans to expand by 50 showrooms every month and aims to touch 5,000 dealerships in five years. First Choice’s revenues in the current fiscal have risen by a phenomenal 80% and its volumes have surged by 40%.
According to First Choice CEO and managing director Nagendra Palle, there is a huge opportunity for organised players in the used car market. Currently, the pre-owned car market is 1.2 times the new car market in India, well below the 2.5 times that is typically found in mature markets.
Palle said, “The organised sector can guarantee trusted quality of the products, while the condition of the cars sold in the unorganised sector and the consumer-to-consumer segment can be questionable. This is the reason for the sudden spurt in demand for pre-owned cars from the organised sector.”
Despite a 15% market share in second-hand car sales, the organised segment is the fastest growing with a 36% spike in FY2017. Meanwhile, the growth for the unorganised sector remained flat in the same period.
Maruti Suzuki is also planning to expand its pre-owned car business, True Value. It recently unveiled plans to open standalone branches solely for sale and exchange of pre-owned cars.
Managing director and CEO Kenichi Ayukawa said, “We want to offer buyers of pre-owned cars the same experience as buyers of new cars. A network of spacious new outlets using digital technology for customer convenience will be a highlight of True Value. Our focus will be on quality cars, refurbished and certified with the assurance of warranty.”
The company plans to increase its dealership count to 300 in the next three years. The company sold around 3,50,000 pre-owned cars last fiscal. Maruti feels that the there is a probability to increase volumes from this space as it remains largely unorganised.
Around 60% of the people who purchase used cars are first-time buyers. The remaining are replacement buyers, or people who are not first-time buyers. Their contribution to the overall used car volumes is on the rise. The pre-owned car market, according to Palle, is going to grow to 70 lakh units in five years.