Organised platforms to contribute 45% to pre-owned car market by FY25, says study

With pre-owned cars gaining momentum among the customers, the industry outlook estimates the used car market to touch 8.2 million units by FY25 from 3.8 million units of FY21. Riding on the back of growing demand, the ratio of used cars compared to a new car is expected to become 2.1x by FY25 and there has been a substantial rise in demand across the organised sector of pre-owned passenger vehicles business, the study said.

By:June 17, 2021 8:19 AM
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Organised platforms would contribute 45% to India’s pre-owned car market by FY25, as the demand for pre-owned vehicles has been constantly growing, especially in rural, tier 2 and 3 cities, a study has revealed.

The market study was commissioned by Frost & Sullivan in collaboration with Das WeltAuto, a division of Volkswagen Passenger Cars India.

With pre-owned cars gaining momentum among the customers, the industry outlook estimates the used car market to touch 8.2 million units by FY25 from 3.8 million units of FY21. Riding on the back of growing demand, the ratio of used cars compared to a new car is expected to become 2.1x by FY25 and there has been a substantial rise in demand across the organised sector of pre-owned passenger vehicles business, the study said.

On the key driver to purchase a used car, 72% of the current owners indicated that the desire to own a car is the most dominant purchase driver and there is a high preference towards purchasing mid-variant models followed by top variant amongst both owners and intenders. While customers prefer young, relatively less driven used cars, the average age of a used car is 3.5 years at the time of purchase, the study said.

While 94% of the current owners are the final purchase decision-makers themselves, for used cars, spouse accounts for 57%, other family members and friends comprise 52% as the key influencers. On the preferred purchase channel, the primary channel for a used car purchase is majorly local dealers contributing to 40%, followed by 22% by individual direct sellers.

The study highlighted that 20% of the customers considered leasing/subscription as a key element while deciding on purchase channel because of the flexibility it offers while used car finance penetration expected to touch 35% by 2025 from the existing 21%. Around 50% of the respondents prefer to cash transaction whereas 21% preferred online transactions and 17% preferred finance options in catch-up mode.

Ashish Gupta, brand director, Volkswagen Passenger Cars India said, “Used car sales will see further growth as compared to new car sales. To tap this growing opportunity, we are relentlessly working towards strengthening our offerings for customers through our national pre-owned car network, Das WeltAuto (DWA). In addition, we believe that tier 2 markets will play a critical role in our used car business volumes and the customer insights from the study will further aid us in addressing their requirements through our customised solutions.”

With the demand for individual mobility 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. 42% of intended customers in tier 2 markets believe that used cars give better value over new ones, according to the study. The organised players offering better financing options to differentiate themselves from unorganised players and strong demand for used cars in tier 2, tier 3 and rural markets jointly will drive finance penetration in used cars.

Kaushik Madhavan, vice president, mobility (automotive & transportation) practice, Frost & Sullivan, 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. This has not only increased transparency and trust in the pre-owned vehicle business but has also exposed potential buyers to newer generation vehicles with better safety, reliability, and quality.”

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