The Emergence Of Used Car Business In India

In India, purchasing anything that is pre-owned is looked down upon. There’s a social stigma attached to it, and the same belief is ubiquitous all over India. However, even this factor hasn’t deterred the unprecedented rise of the pre-owned car business in India. More than 60% of the car sales, a decade ago were customer-to-customer(C2C) with Maruti being the first to enter into the pre owned car business. No one would have predicted that 10 years down the line it would pose a direct threat to new car sales market in India.

India’s new car sales market is going through a prolonged slump, while the 2.7 million strong unit used-car market has gradually taken over the market share. According to global market research firm JD Power, the percentage of first-time car buyers considering used vehicle in the country has increased to 17% in 2014 from just 4 % in 2011. With the number of young buyers on the rise, companies are now accommodating their needs by providing quality tested used-cars  that suit their modest budget. There are alarming statistics surrounding the rise of the used car business; one being that for every new car sold in India, a used car was also sold. The economical prices of pre-owned cars help all types of buyers. The main target audience of the used car market include first time buyers who can purchase technologically advanced cars at lower price before upgrading to a new car, people wanting to buy second car at economical price, people wanting to upgrade their car (eg: from a hatchback to sedan) can do so without stretching their budget.

Therefore, by now it would be safe to assume that the used-car business has taken the Indian automotive industry by storm, and even the major-players aren’t immune to its allure. Skoda Auto India recently announced that it would be entering the used-car segment, in which BMW Motors and Mercedes Benz are already present. "We are looking at the pre-owned car segment. This year, we may have a few pilots starting with Mumbai and Delhi," Skoda Auto India director, sales & marketing, Ashutosh Dixit.

India's pre-owned car business True Value recorded a growth of 36% in the first half of this year while Toyota's used car division UTRUST has been growing 20% in the past few years. "Customers do consider used vehicle as an alternative option and this has been an increasing trend in the recent past," said N Raja, senior VP and director for sales & marketing at Toyota Kirloskar. 

        However, a majority of the transactions take place via unorganized elements, with the organized sector accounting for only 18 % of the market in 2014, as compared to 11 % in 2009.  As such, the market is still largely undeveloped.
         
        If the current market scenario is anything to go by, then the future of used-car business looks promising. Nagendra Palle, chief executive, Mahindra First Choice Wheels, the largest multi-brand player in the segment, says, "The impact of the economy on the used-car industry is more muted than for the new-car industry because in the used-car business, volumes are generated by cars changing hands as well. We believe the slowdown in new-car sales has affected the used-car industry, and growth has slowed from about 22-25 per cent in earlier years to about 18-20 per cent now. However, we experienced a growth rate of nearly 30 per cent last year."

  I     The used car market in India is expected to have a CAGR of 20 percent in the next five years, with the big players in auto sector expected to play a major role in it. One important fact to consider is the likely implementation of GST. There will be uniform tax laws across all states which would make selling and registeration of used cars easy. This would further boost the growth of this segment.