Pre-owned car segment 1.1 times bigger than new ones

Written by Ronojoy Banerjee | Ronojoy Banerjee | Updated: Jul 28 2010, 14:33pm hrs
Mahindra & Mahindra is betting big on the used-car segment. Rajeev Dubey, president (HR-after-market & corporate services) and member of the group executive board at M&M spoke to FE's Ronojoy Banerjee on how the company is looking at increasing the number of used-car outlets across the country. He also spoke about how M&M is going to use its used-car platform to increase its spare parts business. Excerpts:

What is M&M's line of thinking as far as the pre-owned car business, FirstChoice, is concerned

Our basic idea is to give pre-owned car buyers the same experience as the ones who buy new vehicles. We have created a stable service, sales and spare-parts division similar to what is provided to the new car segment customers. This way our pre-owned car customers don't have to run from pillar to post and all facilities are provided to them under one roof.

What potential do you see in the used car or pre-owned car market in India at present And how do you see it evolving over the years

Currently, the pre-owned car segment is about 1.1 times bigger than the new car segment. It is roughly around 1.9 million units in India. Generally, when an economy develops the pre-owned car business grows rapidly. For instance, in US the pre-owned car business is 2.5 times bigger than the new car segment. At present, the pre-owned car segment in India stands at Rs 1,200 crore. By FY15, it is estimated to become an Rs 6,500 crore market. For M&M, the pre-owned car business is around Rs 450 crore.

But why do customers choose used cars over a new one

As the disposable household income goes up, aspiration level too surges. On one hand, people don't want to keep cars for too long and tend to sell off after a few years, increasing the supply of pre-owned cars, on the other hand, another segment aspiring for bigger cars are unable to afford a new one and so choose a pre-owned one. Therefore, there is a healthy mix of demand and supply. Since the pre-owned car business is getting organised, the transparency levels is increasing.

What are your future plans with FirstChoice

We are a multi-branded pre-owned car business, present in 80 cities across the country. We are bullish and confident of creating a synergy between our three divisions: sales, services and spare parts. When this happens, there will be a strong eco-system for pre-owned cars.

Currently you are supplying spare parts to M&M products. Are you looking at increasing your supply of parts to other players and OEM's too

Yes. We are looking at supplying to other players. Our focus is still on supplying to M&M products. Once we are able to do that consistently, we will be looking to increase our share of spare parts to other players. We are going to leverage our used car business to expand our spare parts segment. Currently, our supply to others is very low.