The Indian passenger vehicle market has been on a dream run, and thanks to a slew of new product launches, the industry is expected to clock its best-ever record performance in FY2024.
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On the other hand, the used car segment is also witnessing a bullish growth phase. If one takes a closer look at the industry over the last couple of years, several factors such as – Covid-19, BS4 to BS6 transitions, hike in vehicle prices, premiumisation push, lack of new model options in hatchback and sedans among others – has accelerated sales for the used car segment.
Niraj Singh, Founder & CEO, Spinny attributes the phenomenal growth in the “last 6 years to the millennial generation in India. These tech-savvy individuals prioritise the resale value of vehicles over their size and brand.”
Several industry stakeholdersFinancial Express Onlinespoke to see the ratio of used car to new car sales ranging between 1.5 to 2.1 and growing significantly. This, on the one hand, is a very conservative estimate given the fact that while organised players are seeing much more traction, the unorganised sector and local market still continue to dominate the market.
Gajendra Jangi, Co-Founder and CMO, CARS24 Services points out that “instead of waiting 10 years to sell their car, people are now selling their vehicles within 5–6 years and upgrading to newer models.”
Shriram Automall India’s Sameer Malhotra adds that “every new car sold today becomes the base of used car industry down the line 4-6 years through different modes like exchange, repo, and reselling. So, top selling cars always have the highest potential to become the top demanded models one day.”
Top Demanded ModelCARS24 ServicesShriram Automall IndiaSpinnyMaruti Suzuki SwiftMaruti Suzuki SwiftHyundai Grand i10Maruti Suzuki BalenoMaruti Suzuki AltoMaruti Suzuki BalenoHyundai Grand i10Maruti Suzuki WagonRRenault KwidMaruti Suzuki AltoHyundai Elite i20Renault KwidTata IndicaFord EcosportMaruti Suzuki BrezzaHonda City
Interestingly, while the new car sales are being accelerated by the demand for SUVs and more premium-priced vehicles. The used-car market in India continues to see the budget-friendly hatchback being amongst the most popular.
Demand drivers
There are several factors influencing the growing demand for used cars in India, but the shift from BS4 to BS6 emission norms in 2020 led to a “significant rise in the prices of new vehicles in India. As a result, customers who are conscious of prices are now showing a growing preference for certified pre-owned cars, which are more affordable compared to brand new vehicles,” says Kapoor.
Then there is the challenge of the availability of certain popular models, wherein some cases the waiting period runs from a couple of months to over a year.
Then there is “the outdated perception of used cars as unreliable and inferior has dissipated, and the used car market has grown in volume, matching its new car counterpart,” says Malhotra. Interestingly, Shriram Automall India says it conducted a poll recently, which found that over 67% of respondents expressed a paradigm shift, considering used or pre-owned cars as the new “new.”
Digitalisation and outreach
It is no secret that the demand for new and used cars is coming from across the country, and depending on the geography the ratio varies. But one thing that has helped the organised used-car players more in the tier-2, tier-3 and rural parts of the country is the fact that digitalisation and internet penetration has created a sense of confidence amongst the consumers.
“The demand for pre-owned cars is thriving across different city tiers in India. This is due to improved internet access, notably in tier 2 and tier 3 cities, which has built trust and transparency for online buyers. Online retailers are offering attractive deals and perks, and the combination of online services with physical hubs is making the entire process, from searching to payment, clear and convenient. Buyers can thoroughly examine vehicles online with detailed histories,” says Spinny’s Singh.
Jangid of CARS24 Services shares that “value and affordability” have became important factors, and “millennials were the ones pushing for more cost-effective options.” Then there the push from the industry in terms of discounts, flexible financing, extended warranties, and high-quality cars, which are becomingquitecrucial in influencing the selections made by buyers.
“Due to a lower price and longer regulatory allowances, more affordable after sale services etc, petrol cars predominated, accounting for 87% of sales,” he says.
Demand outlook
While CY2023 has been amongst the best-performing years for the used car segment, the expectations from industry stakeholders remain bullish for 2024 as well.
Sharing his thoughts on the potential, E&Y’s Kapoor says that the $50 billion (Rs 416,550 crore) used-vehicle market in India has the potential to rise to $120 billion (Rs 999,720 crore) by FY2026-2027 (CAGR of 19%). Amongst these passenger vehicles account for about half of the market’s GMV, with the rest coming from other vehicle categories (commercial vehicles, tractors, and two-wheelers).
“The CAGR for the used car market is expected to be around 12.7% over FY2022-27 versus 7% for the new car market, as per the Indian Blue Book,” says Kapoor.
Singh says that “in addition to improvements in organised retail channels, the market for used cars is also multiplying. Individuals in urban areas and metropolitan cities prefer owning multiple vehicles for enhanced mobility and convenience. Furthermore, the increase in female workforce participation in developing countries is also positively impacting used car demand.”
CARS24 Services sees the continued popularity of hatchbacks, growing interest in SUVs due to their affordability, and the prevailing preference for petrol vehicles is expected to shape the market in the coming year.
SAMIL’s Malhotra says he “maintains a highly optimistic stance on the used vehicle industry, anticipating a robust growth trajectory ranging between 15% to 25% throughout the year. The imminent introduction of the scrappage policy is poised to be a pivotal catalyst, fostering additional growth as older vehicles undergo scrappage, compelling consumers to turn to the used vehicle market to meet their immediate transportation needs.”