At Rs 1 lakh crore, India’s used car market could be more than half of new car market – what’s attracting buyers here

By: | Published: October 22, 2018 5:46 AM

At more than Rs 1 lakh crore in 2018-19, business in the used-car market could be more than half that done in the new car market.

cars, automobile sector, automobile industrySpecialised dealerships — that sell all brands of cars — are providing customers with much the kind of deals that are available on the purchase of new cars. (Illustration: Shyam Kumar Prasad)

At more than Rs 1 lakh crore in 2018-19, business in the used-car market could be more than half that done in the new car market.

Already, volumes in the pre-owned car space, at around 3.6 million units is ahead of those in the new passenger vehicles market which reported sales volumes of 3.2 million in 2017-18. Not surprisingly, the more popular cars are those in the entry segment — Alto, WagonR, Swift and Santro — and account for around 60% of the volumes.

A combination of aspiration and easy access to finance is driving the sales of pre-owned cars, and given how much of the business is now transacted in the organised sector, the space is tipped to grow rapidly in the next few years.

Ashutosh Pandey, CEO, Mahindra First Choice Wheels, claims business at his firm is brisk, growing at around 40-50%.

Volumes could well double over the next three to four years,” Pandey said. In the past few years, the used car market has grown at an estimated 10-15% y-o-y. That’s roughly twice the rate at which the new passenger vehicles space is growing.

Specialised dealerships — that sell all brands of cars — are providing customers with much the kind of deals that are available on the purchase of new cars. These include extended warranties, free service for six months, exchange offers and loans. A top dealer in second-hand cars explained that one reason for the rise in sales of used vehicles was the rising cost of fuel and finance.

What’s giving buyers confidence is the warranty that companies provide, which is available for six months to a year. Also, the vehicles are priced attractively. Typically, the value of a new car depreciates by as much as 30% after one year followed by another 5-10% in the next year. “So, anyone buying a two-year-old car will pay approximately 60-65% of the value of a new car,” Ashish Kale, president, Federation of Automobile Dealers Associations (FADA), said. Kale pointed out, for instance a sedan like a Honda City that has hardly been driven for three years could be bought at the price of premium hatchback.

With the used-car business booming, all big manufacturers have little choice but to get into the business. From Hyundai Promise to Maruti Suzuki True Value and Mahindra First Choice, to Toyota U Trust, they’re all there.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition