In a study released by Volkswagen Passenger Cars India and Frost & Sullivan, a number of interesting trends from the used car market were revealed. The study points out that used car buyers are beginning to rest their trust more in the organised platforms that have been established in the past recent years. The ‘Indian Pre-owned Car Market Study’ uses the PESTEL (Political, Economic, Social, Technological, Environmental and Legality) analysis approach that considers a number of factors that affect used-car-buying decisions.
According to this study, the organised platforms would account for 45 percent of the used car market by FY2025. Taking the various factors from PESTEL into consideration, the study deduces that local dealers currently contribute 40 percent to the used car market, followed by 22 percent of individual direct sales.
The industry outlook estimates the used car market to touch 8.2 million units by FY25 from 3.8 million units of FY21. The demand for pre-owned vehicles is constantly growing and the ratio of used cars compared to a new car is expected to become 2.1x by FY25. Further, there has been a substantial rise in demand across organised sector of the pre-owned passenger vehicles business.
Key findings of the Indian Pre-owned Car Market Study
– Average age of cars preferred in the used car market is 3.5 years. The market is more attractive than ever as younger vehicles are now available and modern cars offer better safety and interior features.
– 66 percent of buyers look for at least one year of warranty. 50 percent of customers prefer cash payments, however, online transactions are emerging as a preferred mode of payment with 21 percent opting for them currently.
– Younger buyers prefer mid-variant models. Some 70 percent of the respondents in the age group of 30-39 years prefer a mid-variant model, instead of a base or top-variant.
– As the demand for individual mobility is increasing, 66% of customers in tier 1 and 39% in tier 2 cities feel the price will become the topmost factor considered by potential buyers of used cars, followed by other elements such as manufacturer, maintenance cost, fuel type, safety features and others. In fact, 42% of intended customers in tier 2 markets believe that used cars give better value than new ones
– 30 percent of used car buyer opt for purchasing accessories
– Organised platforms for used car sales offer better finance options than unorganised players. The study also underlines that the strong demand for used cars in tier 2, tier3 and rural markets jointly will drive finance penetration in used cars.
– Car ownership is looked at as a status symbol as believed by 66 percent of the respondents. 63 percent interested in car ownership even if public transport offers more affordable mobility options.
The study highlights that the market share in the organized sector will touch 45% by FY25 from the current 25%. This is a clear indication of a change in consumers’ preference for personal mobility. Used car sales will see further growth as compared to new car sales. Das WeltAuto (DWA) believes that tier 2 markets will play a critical role in the used car business volumes and the customer insights from the study will further aid in addressing their requirements through our customised solutions, Ashish Gupta, Brand Director, Volkswagen Passenger Cars India, said.
Growth in the Indian pre-owned vehicles market is driven by rural and tier 2 and 3 cities in India, especially with the entry of OEM-supported channels. In combination with attractive financing options, the non-metro market is expected to drive additional revenue generation opportunities for the OE authorised channel partners over the next 4-5 years, Kaushik Madhavan, Vice President, Mobility (Automotive & Transportation) Practice, Frost & Sullivan, said.
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