Five reasons behind the drastic growth of the pre-owned luxury car market post-pandemic | The Financial Express

Five reasons behind the drastic growth of the pre-owned luxury car market post-pandemic

Where the entire automobile industry was reeling under the influence of the pandemic, the pre-owned luxury car segment adapted itself to capitalize on the drawbacks

Five reasons behind the drastic growth of the pre-owned luxury car market post-pandemic
Here are five reasons that ramped up the demand for pre-owned luxury cars post-pandemic

By Sumit Garg

The pandemic-induced lockdown emerged to be a challenging time for both humans as well as businesses across the globe. But ironically when the various industries were down with a period of dry spell, the lockdown proved to be a silver lining for the pre-owned luxury car industry. Where the entire automobile industry was reeling under the influence of the pandemic, the pre-owned luxury car segment adapted itself to capitalize on the drawbacks by turning them into opportunities.

Here are five reasons that ramped up the demand for pre-owned luxury cars post-pandemic

Sudden market disruption

The lockdown induced various mobility restrictions which severely disrupted the supply chain of the industry. The import and export were severely impacted making it difficult to procure essential commodities for the continuity of the production line. In addition to this, as traveling was confined the industry recorded plunging demand for cars. As a result, production at OEMs kept shutting down due to the disruption in the value chain and the decline in sales of vehicles.

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Global semiconductor shortage

Owing to the disturbance in the entire value chain, even semiconductor production underwent a period of slowdown. But with the opening up of the market, a sudden surge was witnessed in the demand for new cars. Against the rising demand, it was challenging for manufacturers to produce semiconductors at the rate of the surging demand as it requires a timeline of 3-4 months to manufacture semiconductors which cannot be fast-tracked. As a result, the entire world was plagued with the semiconductor shortage that severely impacted the production of new cars. Eventually, it converted into long waiting periods for new cars that extended from 6 months to 1 year.

The soaring price of new cars

Before COVID, the supply of cars had been exceeding the demand portrayed by the market. But with the disruption of the value chain, post-pandemic the OEMs restricted production to the demand of the car in the market. For which, the new cars after the lockdown were not supported with any kind of discounts. As the supply chain had been disturbed, the automobile industry found it really challenging to procure the commodities for manufacturing cars. Due to this, the price of commodities like steel surged phenomenally. Cumulatively there was a sudden spike in the price of the new car which acted as a major discouragement amongst the consumers to go for a new car.

Changing consumer behavior

Looking at the market scenario, the consumers were looking for alternate options to find solace from the long waiting period and the rising price of the new car. In the midst of such chaos, the pre-owned car market emerged as the most viable option. Interestingly, millennials and the affluent group formed a major part of the consumer base. This particular consumer base had a certain level of aspiration for premium cars backed up with the latest technology, unrivaled performance, and the comfort of luxury. The consumers previously owning cars in the range of Rs 15-20 lakhs were upgrading to pre-owned luxury cars in the price range of Rs 25-35 lakhs.

Rise of organized players

Though pre-owned luxury cars had been there even before the pandemic, the segment was majorly dominated by local dealers. Due to this, there was a lingering fear amongst consumers about the quality and authenticity of the cars. Perceiving this void in the market and looking at the slowdown of the automobile industry, the organized players in the pre-owned luxury car segment took this as an opportunity and came up with a mix of online and offline services enabling consumers to explore through a wide range of options during the lockdown and at the same time had the provision for an offline visit to thoroughly scrutinize the car before purchase.

They carried out a thorough inspection of the car ensuring that all the parts were in good condition. They left no stone unturned in organizing the otherwise scattered industry and went a long way in providing financing options, warranty, and helping the customers with documentation of the car. All these factors played an instrumental role in instilling faith in the pre-owned car segment amongst the customers where they got the same level of hassle-free experience as in the purchase of a new car.

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The market for the pre-owned luxury car continues to stay strong even after the receding of the COVID-19 pandemic because of the rising desire to own a luxury car being prevalent in recent years. As consumers nowadays come with a short ownership period, they are highly choosing pre-owned luxury cars rather than opting for a new luxury car.

(Sumit Garg, MD and Co-founder, Luxury Ride. The views expressed are of respective author, and do not reflect the official position or policy of FinancialExpress.com.)

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First published on: 05-11-2022 at 10:37:54 am
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