India is home to the world’s largest two-wheeler market. But, despite the robust demand for two-wheelers, the pre-owned two-wheeler segment has lagged behind.There is no concrete data available on the size of the Indian pre-owned two-wheeler market.
Unlike the passenger and commercial vehicle segments where many manufacturers have also entered the pre-owned space, the two-wheeler segment has just recently started seeing some traction with the likes of Royal Enfield entering the space. Hero MotoCorp thus far has been the only other significant presence in the used car space. But all that might change soon with industry players seeing the potential of the used two-wheeler sales reaching the double-digit mark in 5 years.
Automotive industry veteran, Srinivas Kantheti, Co-Founder and MD of Bike Bazaar, a pre-owned two-wheeler financer, told Financial Express Online, “Research on the exact size of the pre-owned two-wheeler market in India yields varied results, with no definitive ballpark figure. However, industry experts generally estimate it to be approximately 50% of the new two-wheeler market, suggesting an annual volume of around 8 million units. Despite this substantial size, the organised sector remains relatively small, accounting for only 2-3% of total pre-owned two-wheeler sales.”
One also has to understand that, unlike the passenger vehicle market, there are some unique challenges associated with the used two-wheeler space that need to be addressed to bring the largely unorganised segment towards the organised space.
Firstly, is the turnaround time. With the mass-market two-wheelers (100-200cc) the average ticket price cannot be charged at a very high premium, this means that the organised players have to maintain a safe level of inventory or end up with dead stock.
Secondly, since there is no formal pricing mechanism available, determining the value of buying/selling a pre-owned two-wheeler is a tricky affair.
Thirdly, one of the key factors influencing any pre-owned two-wheeler is the service maintenance history. Unlike, the passenger vehicle segment, many two-wheeler customers prefer to get their vehicles serviced at a convenient and economical location near their residence, which may or not be the authorised service centre.
The availability of suitable financing options for pre-owned two-wheelers is also a matter of concern. Narain Karthikeyan, India’s first Formula 1 race driver and the Founder & CEO of DriveX, a pre-owned two-wheeler platform said that “roughly just around 6 percent of the used two-wheeler are getting financed at the moment.”
Potential to grow
Similarly to the new vehicle sales, the used two-wheeler segment has high potential in India with projected sales expectation of 26 million units annually.
Karthikeyan added, “The used two-wheeler market is projected to grow at 12% YoY over the next 5 years to reach a market size of around $30 billion (Rs 249,930 crore).”
In terms of demand trends, Kantheti shared that “The average ticket price is Rs 50,000, however, the most popular models are Honda Activa in the scooter segment and Hero Splendour in motorcycle. The average ticket price is a little higher because of a significant contribution of over 150+ cc motorcycles like Bajaj Pulsar and TVS Apache among others.”
The customer profile opting for used two-wheelers is rather interesting- Bike Bazaar data indicates that “In urban markets, a lot of women customers are inclined to buy pre-owned two-wheelers. The majority of them are students, homemakers, house help, beauticians and first-time employees.” This could be attributed to the fact that having a two-wheeler allows freedom of movement and in turn flexibility to travel as per one’s comfort and needs. Easier maintenance is a key influencing factor.
DriveX has observed that 48 percent of its customers fall under the average age of 20-30 years; 35% in the 30-40 year age bracket, while the remaining are over 40 years of age.
“There’s no doubt about the huge potential of this segment in India. With the advent of more organised players and a faster transition of the new two-wheeler industry to electric, there will be huge growth both on the supply and demand side. In the next phase, once the rural market starts getting organised, the used two-wheeler industry will definitely enter a hyper-growth zone,” added Kantheti.
Interestingly, in FY2023 Bike Bazaar disbursed Rs 823 crore towards financing of pre-owned two-wheelers. This is expected to grow to Rs 1,200 crore in FY2024, accounting for over 45 percent growth, thus showcasing the huge potential of the industry.
