Demand for pre-owned cars has risen in the past year
Image used for representation.
As consumers prefer more personal yet affordable mobility solutions during the pandemic, the online used car market is seeing an increased uptake. Online used car marketplaces and platforms have seen a growth of 17-18% in FY21, according to Deloitte. Some of the leading players in this segment, the likes of Mahindra First Choice Wheels, Cars24, CarWale and CarDekho, have made inroads into rural markets by launching dealerships and franchises, marking the shift towards online and contactless sales in the past year.
According to a report by Indian Blue Book, an online vehicle pricing guide, the industry volume of used cars was pegged at 3.9 million units in FY21; in FY20, this number was 1.4 million. The new car market, meanwhile, is estimated to have seen a 36% y-o-y degrowth, largely due to the national lockdown imposed in the first part of 2020.
The report states that there has been a 60-70% increase in the number of first-time buyers of pre-owned cars in FY21, and that 73% consumers prefer the online channel to explore pre-owned cars. These platforms are, hence, enhancing their online customer checkpoints and offering financing options for both dealers and end users.
Cars24 is now offering features like video KYC, home inspections and instant credit. “Despite high competition, we have witnessed about 50% growth over the pre-Covid period. Customers look for end-to-end support and buyback options, but the market doesn’t have such features. The NBFC feature has allowed us to deeply integrate and enhance our customer trust,” says Kunal Mundra, CEO, Cars India, Cars24. The platform has a seven days no-question-asked refund policy, and a six-month warranty cover on cars purchased.
Banwari Lal Sharma, CEO, CarWale & BikeWale, says that even though the pandemic resulted in a 10-15% decrease in demand for used cars, the overall traffic for this segment on CarWale grew 48% y-o-y in January 2021 compared to January 2020. “We are planning to expand into 100 cities in the next three years with a network of franchise dealers, and adopt a phygital model,” Sharma adds. In the pre-owned cars market, companies are concentrated in the top 20 cities, with metros contributing 70% of the traffic.
Meanwhile, Mahindra First Choice Wheels claims to have witnessed 20% growth in FY21 on its online platform. It has launched remote dealer management, digital vehicle certification along with warranty and automated communication to drive its online sales. “We implemented a four-pronged strategy including the expansion of 200 used car franchisees in the past 12 months across the country. Our single-window approach to managing the customer journey was the most impactful of all,” says Ashutosh Pandey, MD and CEO, Mahindra First Choice Wheels.
The used car market is currently working on a phygital model, as touch and feel is still an integral part of the purchase. While the demand for used cars is seeing an uptick, the lack of adequate working capital has been an impediment. But that is changing, says Rajeev Singh, partner and automotive leader, Deloitte India. “Companies are coming up with innovative ideas of supporting the dealers, making the market more lucrative.” For instance, Cars24 launched Cars24 Financial Services to provide vehicle loans to customers and financial assistance to its channel partners.
The rural market will be a key avenue for growth, says Kaushik Madhavan, vice president – mobility, Frost & Sullivan. “With an increased number of refurbished models and more OEMs entering this ecosystem, the pre-owned car market may become twice the size of the new car market by 2024,” he adds.