The Hindu Business Line : Used market expected to outpace new car market

MR Vivek Hallur, an engineer and an IIM graduate, left a high-paying job with a software company two years ago to set up a pre-owned car dealership in Bangalore.

He hasn't regretted his decision since then. Mr Hallur is one of the several entrepreneurs who see a huge opportunity in the pre-owned (used) car market, which, for the first time, is expected to outpace the new car market posting a growth of about 30 per cent in 2004-05.

"We have already opened a second branch because of the huge demand," Mr Hallur told Business Line. He sees the pre-owned car market revenues growing at about 30 per cent.

Maruti's True Value, another organised player in the market, expects its volumes to double to about 35,000 units this fiscal, a senior official with the company said. With 34 per cent of new car buyers already owning a car, the current size of pre-owned car market in India is between 6 lakh and 7 lakh units per annum.

The Maruti official said the pre-owned car market is also witnessing a shift towards the organised sector with more car owners opting for professional service to sell their vehicles. A year ago, nearly 60 per cent of those who wanted to sell their cars found buyers among their relatives and friends while the rest hawked their cars through pre-owned car dealers.

Mr Hallur has introduced several innovative practices to drive his company's growth.

"We carry out a 25-point check of each car and share the information with the customers," says Mr Hallur. The footfalls to such dealerships have increased because the customers get the same professional service as they would from a new car dealer, he said.

Maruti's True Value is also integrating its marketing efforts with that of the new car sales team of the company to notch up better volumes. "The demand has increased so much that we are always on the look out for more sellers," the Maruti official said. An official with fleet management company Orix said pre-owned car dealers enjoy a higher margin compared with those who deal with new cars.

She said even the bank interest rates have dropped to around 11 per cent because of the boom in the sector. The Orix official pointed out that customers can now get even a 2004 model in the pre-used car market. Two years ago, a customer would have considered himself lucky to spot a three-year-old car. "Today, he can buy a 2004 model in nearly mint condition and at a far lesser price," the official said.

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