Amidst the ongoing slowdown in the Indian automotive sector, the second-hand car market seems to stay afloat and continues to expand at a rate which is far greater than the new car space. In the last couple of years, India has shown an increased inclination towards second-hand cars and with multiple options on offer. Backed by attractive incentives and warranty schemes, the segment has grown multiple folds. Shubh Bansal, Co-Founder, Truebil, in an interaction with Express Drives, shares his insights on the ongoing trends in the used car space, his expectations from the 2019 festive season and the challenges that lay ahead.
What are your expectations in terms of sales from festive season 2019?
Despite the sluggish growth in the automobile industry over the last few quarters the used car market has continued to witness accelerated growth and is now booming. The festive season is always a great time of the year not only for the customers who look forward to many discounts and offers but also for the firms. It is one of the crucial times of the year as the sales spike and it is the best time to meet all the year-end targets. Unlike the new car market, the used car space is growing and we hope to see a 15-20% sales hike during this festive season.
The second-hand car market seems to be unaffected by the ongoing slowdown in the new car space. In fact, it has grown multiple folds in the last couple of years. How do you see this and what do you think are the main reasons behind this?
Over the past 2-3 years, we’ve noticed certain changes in the buying pattern of people overall. Most of them would want to look in for value for money and the best deal that suits well with their pocket. The average ownership period of a car is coming down to about 3 to 5 years compared to 8 to 10 years about a decade ago. In many cases, a three-year-old vehicle is as good as a new one, which encourages the buyer to go for a used car. And this is not even surprising, given our economic development and increasing disposable income. In developed economies, the ratio of people buying a new car and a pre-owned car is 1:3, meaning one out of four buys a new car and three settles for a used car.
The value of a car depreciates significantly in the first year itself, up to 50% for some models. From a buyer’s perspective, the aspiration of owning a car is getting fulfilled at a lower price point. Certainly, given this scenario, opting for a new car would mean burning a hole in the pocket.
However, the used car market is largely driven by supply and not demand, which is not the case with the new car market, and I believe that this trend of high sales of used cars will continue in India.
India is slowly warming up to the idea of car leasing. OEMs have started venturing into this space themselves. Going into the future, do you see car leasing posing as a threat to the pre-owned car retail channels?
Definitely, in India, the car leasing industry is booming at a considerably good rate, compared to not too long ago there used to be a time when the pride of ownership was more important than the financial inconvenience associated with it. But with the emergence of private and business car leasing, there’s been a noticeable shift in people’s mindset.
To cut it short, if a low monthly payment is the user’s primary goal, leasing might be a suitable approach for them. However, if the buyer’s concern lies in making the most sensible financial decision for acquiring a car, a used one turns out to be the better option by paying it off and keeping it for a few years.
The money factor again also plays a role while we are talking about leasing a car or buying a used one. On average, a new car loses around 12% of its value in the first year itself and some cars depreciate even faster, depending on the demand, incentives offered and other factors.
Opting to lease a car over buying a used one would be more sensible if the primary motto of the driver is just to drive someone from a point A to B. Leasing a car and going for a newer one would likely be the most effective way to go. But if the aim is just to minimize the miles on the leased car, opting and sticking onto a reliable used car for personal use works best.
Regardless, if someone leases a car, they make payments for a specified period of time and then at the end of the term they have nothing to show for their money. They literally own nothing. However, while buying a pre-owned car, at the end of the term, the buyer owns a car. They can keep that car indefinitely or sell that car for the value.
Leases might be tempting. But financially, the best way to buy a car is to pay cash for something pre-owned to avoid paying both interest and off-the-lot depreciation. In the end, one would want a car that they call it their own.
Used car dealers have always been painted in grey. There is a lot of scope in this space to mislead someone. What steps should pre-owned car retailers take in order to increase the trust factor? What steps does Truebil take in this regard?
We believe our role is to provide as much information and advice as we can to allow our consumers to make an informed choice, so it’s about helping people to buy, as opposed to selling to them. Transparency and honesty are key to this aim. At Truebil we have 2 strong proprietary technology enablers to help ease the decision making factor to our stakeholders as well as consumers.
TrueScore – The vehicles that Truebil offers to its customers have the advantage of TrueScore, Truebil’s super-efficient rating meter which provides customers with a fair idea of the condition of the vehicle. By leveraging a consummate inspection across 150 touchpoints and an advanced AI-driven algorithm, each vehicle is given a rating that accurately captures its performance and health. This ensures that Truebil customers have a ready and convenient way to evaluate the vehicle, leading to more informed consumers.
Trueprice – For sellers, Truebil’sTrueprice, a proprietary car tool, uses advanced technology to give a data-driven intelligent assessment of the car’s current value, based on complex pricing models which account for a large number of variables. This ensures that sellers don’t have to worry about being short-changed, and can rest assured that they have received the best possible price for the vehicle they are selling.
Truebil Direct – Truebil direct is the store (Currently operational in Delhi, Mumbai & Bangalore) that enables buyers to shortlist and buy best-quality cars directly from its offline dark store with a 1-year comprehensive service warranty, 1-year roadside assistance, and 1-year free servicing. At Truebil Direct, we maintain a unique online to offline integration that offers customers enhanced service experience.
Moneyback Guarantee Offer – With the festive season in mind, we recently introduced our Moneyback guarantee offer that allows a 7 day trial period and no-questions-asked moneyback guarantee if the chosen car does not meet the buyer’s purchase criteria. This allows the buyer to have a whole weeks time to test-drive a car and see if it meets their needs
Thus, by making way towards giving access to a wide variety of choices for consumers and offering the best prices along with the reliability and quality that a dream car should come with, Truebil is heading towards bringing about a revolution in the used car market in the country, making the buying process a gratifying experience for the consumers.
Can you shed some light on the ongoing trends in the used-car market? Is the buyer preferring any particular segment? Similarly, is there any particular manufacturer in greater demand?
Currently, I can say that with new regulations and changing consumer tastes, the surge in the sales of used cars is expected to continue. Cars with the resale value, technology and safety are the top three considerations that Indian market and families are looking out for. Based on our consumer data, we have noticed that cars in metropolitan cities change their vehicles faster. So while the supply of used cars has been in tier 1 cities, the demand for the same has been increasing in the tier II and smaller cities. It was approximately 10% higher than the usual demand in smaller cities.
Along with this, there are several hyper-local and geographical parameters that drive the pre-owned car market, which remains largely unorganized. The demand-supply equation matters a lot in this space & the buyer’s preferences changes depending on the veracity of the vehicle. Say, for instance, it gets difficult to find a buyer for a 10-year-old Honda city in Mumbai, but penetrating into smaller towns such as Kolhapur, Pune and Nashik would have buyers for that vehicle. In such satellite cities, there is a huge demand for 7-10-year old cars compared to large metros.
At Truebil, our buyer’s profile is majorly from the age group of 25-35 who are mostly young professionals. Initially, we had this hypothesis that the buyer would be around 35-40 years old. The sweet spot for such buyers to purchase a used car is the one which is 3-5 years old. This trend again is not visible in tier 2 & 3 cities.
With companies gradually focusing on reducing the production of diesel cars, for instance, Maruti Suzuki’s decision to exit the diesel car segment by April 2020, is also expected to increase the demand for compact diesel cars in the used car market, unless there is a repercussion against diesel cars.
You have integrated machine learning algorithms to improve user experience. How has the response been from the customers? How the integration of technology has helped you as a business?
Truebil being an auto tech platform, with ML we have managed to achieve precious insights on rapidly consumers preferences and have noticed a consequent demand for used cars in recent years. For the benefit of the users, we developed proprietary tech-enabled evaluation mechanisms such as recommendation system personalized for each user.
We understand that every buyer would lookout for something different and their decision making factor would differ from others.
With our TruePrice and TrueScore, our customer can take into account several factors like the brand, age, price, mileage, history etc and provides a numeric index on the scale of 0-5, which in return makes it easier for the customer in the decision making the stage as to which car to go for.
This has really shaped the entire structure of selecting the right car for our users and we are affirmative about this as it reflects in our sales. Thanks to these tech-based platforms that churn out real-time information to help the car buyers in getting hold of all the research, price quotes and comparison of the listed vehicles as well. They are not only bringing out the various aspects but also adding to an experience which customers were always desiring.
With this our business efficiency and productivity has increased which gives us the ability to stay ahead of our competition. It just saves a lot of time for everyone when all the data is kept together, organized and accessible giving us more time to think about the issues and possible advancements that we can do or that’s been happening in the industry.
Apart from that, technology has been effective in making the customers well informed and updated and with this infusion we can see a whole new breed of customers taking an interest in used cars and its indeed a very positive growth for us and the used car space.
With the implementation of new emission regulations, prices of new cars are set to increase. Do you see this as an opportunity for the used car market space?
Naturally, yes. These regulations directly affect our business and we have already seen a growth in the used car space. To implement the norms, manufacturers will require higher investment to upgrade vehicles in stock and making new vehicles which would also mean fewer launches. Automakers will eventually pass on the cost to their buyers and they are the ones who will have to pay more.
OEMs these days are offering huge discounts on their entire product line-up. Are you also offering similar incentives to boost demand this festive season?
OEMs providing discounts on the occasion of Navratri, Dhanteras and Diwali have definitely got a bump up in the graph but this uptick comes after the sales for them have experienced a downscale by double digits each month from April to September. So for them to provide and come up with festive discounts, proved to be beneficial. However, at Truebil, our primary aim lies in satisfying our customer in every possible way even after the sale is done.
This festive season we wanted to augment customer experience by providing flexibility and 100% assurance to buyers who are often sceptical while making heavy investments. To ensure this, we announced our ‘Moneyback guarantee’ offer this Diwali.
Under this offer, buyers have a whole week to test-drive the car as part of their daily routines and see if it meets their needs. If for any reason, the buyer is not satisfied with the car, they will be able to get a full refund on their purchase amount. All they have to do is make sure the car is returned within 7 days from the date of purchase and has been driven under 200km. Additionally, they must ensure that none of the car parts has been damaged or replaced, i.e. they should be returned in the same condition that they were received in.
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