Pre-owned biz profit tool for luxury car makers too

These brands looking at second-hand car sales as additional revenue source.

Updated: November 3, 2019 2:07:24 PM

By Shashank Dipankar

Luxury car manufacturers Mercedes, BMW and Audi are increasing their focus on pre-owned cars through their online platforms in a bid to increase customer base and attract first-time buyers to their brands. These auto-makers are offering extended warranties, roadside assistance and a variety of finance options for pre-owned cars. Customers can easily list their cars (any brand) for sale as well as buy pre-owned cars on these platforms. Demand for pre-owned luxury cars has held up even in the face of a slowdown for automobiles. In fact, this is an added source of income for dealers of these luxury automakers.

Audi’s online platform for second-hand cars (known as Audi Approved: Plus) saw a 25% rise so far this year in sales compared to 2018. Mercedes-Benz also launched its e-commerce platform to sell pre-owned cars in October. Pre-owned luxury cars offer better value to customers than new ones, especially when customers have to pay 48%-50% tax for a brand new vehicle, which includes 28% GST and cess depending on whether it is a sedan or an SUV.

On the other hand, consumers only pay 18% GST for old cars. For example, a brand new Mercedes E 350D diesel is priced at Rs 73.60 lakh (ex-showroom) whereas one can buy a pre-owned E 350D 2015 model at a price of Rs 26.50 lakh and E 350D 2016 model at Rs 63.50 lakh. It is also available at cheaper prices on other platforms like OLX, but they generally have older models and they tend to lack proper certification.

Speaking about the potential of pre-owned luxury car business, Martin Schwenk, MD & CEO, Mercedes-Benz India, said, “The used car market has a huge potential and e-commerce is a good platform to sell used cars. We see our pre-owned car segment as a mean to increase our customer base as these will be the people who will upgrade to a new Mercedes car in a couple of years.”

Cars, which are listed on the websites of these luxury automakers, are certified, which means they have been thoroughly checked for any defects. Along with certification, companies also provide financial options for customers and warranty or service plans depending on the company.

Rudratej Singh, president & CEO, BMW India, said, “Used cars are a way to attract customers who generally hesitate because of high taxes and other factors. We are planning to increase the ratio of used cars. This will allow more people access to our service station, after sale services absorption will go up and dealer profitability goes up as well. It is one of our prime focus in coming years.”

Pre-owned luxury car customers are mostly first time buyers, scouting for better deals to buy their first luxury car. Key buyers also include young working executives and professionals. Balbir Singh Dhilon, head, Audi India, said, “We have seen a surge of first-time buyers. We currently have seven exclusive Audi Approved: Plus car showrooms. Our dealer partners have identified profitability in 2018 and 2019 through this vertical and we are confident of growth in the coming years. We will announce our expansion plans on this front shortly.”

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