The used car market is expected to touch 8.2 million units per year by FY25 from 3.8 million units in FY21, according to a recent used car market report, which also predicts that organized used car platforms are expected to contribute 45% to the total pre-owned car market by the next three years.
The ‘Indian Pre-Owned Car Market Study’ report is produced by Frost & Sullivan in collaboration with Das WeltAuto (DWA), the pre-owned car division of Volkswagen Passenger Cars India.
“Demand for pre-owned vehicles is constantly growing and the ratio of used cars compared to new cars is expected to become 2.1x by FY25. Further, there has been a substantial rise in demand across the organized sector of the pre-owned passenger vehicles business,” the report said.
It further said that organized players who offer better financing options and create strong demand in Tier-2, Tier-3, as well as rural markets will drive finance penetration in used cars.
While the pre-owned car market is largely occupied by unorganised players, a few organised players in the segment include Maruti Suzuki True Value, Mahindra First Choice, Hyundai Promise, Honda Auto Terrace, amongst others.
Ashish Gupta, brand director, Volkswagen Passenger Cars India, said, “The study highlights that the market share in the organized sector will touch 45 percent by FY25 from the current 25 percent. This is a clear indication of the change in consumer’s preference for personal mobility. Used car sales will see further growth as compared to new car sales.”
“We believe that Tier-2 markets will play a critical role in our used car business volumes and the customer insights from the study will further aid us in addressing their requirements through our customized solutions,” he said.
The study highlights that the market share in the organized sector will touch 45 percent by FY25 from the current 25 percent. This is a clear indication of the change in consumer’s preference for personal mobility. Used car sales will see further growth as compared to new car sales.Ashish Gupta, Brand Director, Volkswagen Passenger Cars India
According to the global research and consulting firm ICRA, on the back of the increasing preference for personal mobility and the low base effect of the last fiscal, the used car volume is expected to grow over 15% in FY22. It also stated that the organised players will grow at a much faster pace than the unorganised segment players. India sold about 4.4 million used cars in FY21 compared to 2.7 million new cars. Preference for affordable personal mobility amidst the ongoing pandemic resulted in a surge in pre-owned car sales. However, the used car market grew only marginally from about 4.2 million in FY20, mainly owing to short supply.
As per the study, the desire for car ownership is the primary driver for purchasing a used car. The desired vehicle is compelled by price, followed by other factors such as comfort, features, and maintenance required.
The report also stated that at the time of purchase, used car owners across all age groups preferred cars with an average age of 3.5 years. Since the recent models offer better safety, infotainment, and powertrain features, the availability of fresher vehicles has made purchases of pre-owned vehicles more attractive than ever before.
Kaushik Madhavan, vice president, Mobility (Automotive & Transportation) Practice, Frost & Sullivan, said, “Growth in the pre-owned vehicles market is driven by rural and Tier-2 and Tier-3 cities in India, especially with the entry of OEM-supported channels. This has not only increased transparency and trust in the pre-owned vehicle business but has also exposed potential buyers to newer generation vehicles with better safety, reliability, and quality.”
“In combination with attractive financing options, the non-metro market is expected to drive additional revenue generation opportunities for the OE authorized channel partners over the next 4-5 years,” he added.
Further, the study said that the primary channel for a used car purchase is majorly local dealers contributing to 40%, followed by 22% by individual direct sellers.
The study was done across 12 cities, among the current and prospective used car owners, with a mix of male and female customers, ranging between the age group of 25 and 59 years.
In 2014, for every new car, an old car was sold. It has been rapidly changing, especially after the economic slowdown in 2019 and with the pandemic in 2020 as people preferred affordable personal mobility. India sold about 4.4 million used cars in FY21 compared to 2.7 million new cars. The used car market grew only marginally from about 4.2 million in FY20, mainly owing to short supply. This poses a major challenge against the potential growth of the used car market arising because of the shrinking new car market. ETAuto analyses the factors and finds out what’s in store for the business.
