Chase India, a public policy research and advisory firm, and Consumer Voice, a consumer-centric voluntary organisation, have come up with a report on the Indian used car industry. Titled “Unlocking True Potential of Pre-Owned Car Industry post-COVID-19”, the report looks at laying a robust and resilient policy ecosystem for the used car industry.
The pandemic gave the used car sector a push in growth, and used car dealers have reported growth during the pandemic, including the used luxury car segment. This is opened doors to various types of players – online and offline – who act as intermediaries in the transaction between the buyer and the seller.
As per the report, “At present, there are no regulatory provisions for these intermediaries although they are at the centre of transactions for pre-owned cars and trade the car multiple times before it is eventually registered in the name of the ultimate owner. The Motor Vehicles Act, which is the current law on the sale, purchase and registration of motor vehicles, has been unable to keep up with the changing dynamics in the market, particularly with respect to the role of intermediaries.”
The report points out five issues and suggests changes. They are:
Issue 1: Recognize the role of intermediaries in the pre-owned car market
Suggested Change 1: The MV Act should be amended to include the definition of a ‘Motor Vehicle Intermediary’ as a dealer or trader who facilitates transactions between the buyer and seller in context to the sale and purchase of a preowned/registered motor vehicle.
Issue 2: Timely transfer of registration
Suggested Change 2: The Act should be amended to ensure that intermediaries, buyers and sellers are all required to ensure transfer of registration within a stipulated time period. Section 50 of the Act should be amended to provide for a penalty in case of non-transference of registration by the intermediary and the buyer.
Issue 3: Temporary registration of vehicles by intermediaries
Suggested Change 3: The Act should be amended to allow for temporary registration of vehicles by intermediaries under section 43 of the Act, which currently only allows owners to apply for temporary registration of vehicles. The Act should also require the issuance of delivery receipts by the intermediaries in favour of the sellers, which would allow the seller to approach the registering authority, in case the intermediary defaults.
Issue 4: Prohibition on driving a pre-owned vehicle that is temporarily registered
Suggested Change 4: Driving vehicles temporarily registered as – ‘in possession of intermediaries’ should be prohibited, except for purposes enumerated in Rule 41 of the Central Motor Vehicle Rules. Section 39 of the Act, which provides for the necessity of registration and prohibits driving of an unregistered motor vehicle, should accordingly be amended
Issue 5: Recognize the distinction between transactions involving pre-owned and new vehicles
Suggested Change 5: The Act should account for this distinction and recognize the expanding market of pre-owned cars; identify the different actors involved; require their registration; and protect the interests of the consumers who purchase pre-owned vehicles, particularly from the unorganized sector.
Ashim Sanyal, the Chief Operating Officer of Consumer Voice said, “Consumers would be the biggest beneficiaries in case Motor Vehicle Intermediaries comes under the ambit of the law. This would ensure consumer empowerment as they would not be held accountable in case of misuse of their vehicles by intermediaries. Therefore, the MVI classification would provide clarity and ensure better consumer support”.
Kaushal Mahan, Group Business Director, Chase India said “Through the report, we aim to provide a comprehensive roadmap based on various international models to regulate the sector. This would enable better coordination between the centre and state governments as well as ensure the growth of the tech-enabled industry. Moreover, the formalization of the sector would attract more start-ups that could potentially be future unicorns”.
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