India’s used car market is on a strong growth trajectory, outpacing new car sales and attracting significant attention from both consumers and industry players. According to the latest CRISIL Ratings report, the used car segment is expected to see an 8-10% volume increase this fiscal year, more than double the growth rate of new car sales.
Here’s an in-depth look at what’s driving the used car sector:
1. Changing Consumer Preferences
Volume Surge: Used car sales in India are projected to surpass 6 million units this fiscal year, driven by value-conscious buyers, greater digital adoption, and easier access to financing.
Used-to-New Ratio: The used-to-new car sales ratio has climbed to 1.4, up from less than 1 five years ago, highlighting a significant shift in consumer behaviour. This trend mirrors the rising confidence among buyers and reflects quicker upgrade cycles, with the average age of used cars dropping to about 3.7 years.
Global Comparison: Despite this progress, India still trails mature markets like the US (2.5), UK (4.0), and Germany (2.6) in terms of the used-to-new car ratio, indicating substantial room for further expansion.
2. Organised Players and Profitability Challenges
Organised used car companies, including well-known platforms such as CarDekho, Cars24, Cartrade, Spinny, and Mahindra First Choice, now account for half of the organised market and a third of total used car sales.
Operational Costs: These companies face high costs related to customer acquisition, refurbishment, logistics, and financing, which have led to ongoing cash losses. However, robust revenue growth is expected to help achieve operating breakeven within the next 12-18 months.
Integrated Services: The shift towards offering comprehensive services like inspection, refurbishment, financing, insurance, and doorstep delivery is expected to improve margins and customer experience, gradually narrowing losses.
3. Market Resilience and Future Outlook
Resilience Amid Disruptions: The used car market remained stable even during the pandemic and semiconductor shortages that hampered new car production. Ongoing rare earth magnet shortages and delayed new car deliveries are further pushing buyers towards pre-owned vehicles.
Financing and Digital Adoption: Improved access to vehicle finance, often powered by AI-driven underwriting and lender-platform partnerships, is supporting this growth. Organised players have raised over Rs 14,000 crore in equity since 2019, focusing on scaling up inspection hubs and strengthening technology infrastructure
Quality Inventory and Growth Potential: While the outlook remains positive, the availability of quality used cars will be crucial for sustaining momentum. With the average age of used cars declining and a growing preference for utility vehicles, the market is poised for continued expansion.
