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Tech-enabled players to account for 20 per cent of used-car sales by FY26: Report

G Balachandar | | Updated on: May 16, 2022
Customer behaviour trends led by lower ownership cycles and greater convenience will see tech players gain market share.

Customer behaviour trends led by lower ownership cycles and greater convenience will see tech players gain market share. | Photo Credit: Nagara Gopal

Tech platforms have ushered in an enhanced price discovery mechanism along with trust and transparency, the report says

 

Tech-enabled players in the Indian used-car market are likely to account for a 20-22 per cent share in FY26, up from 2-3 per cent now, according to Praxis Global Alliance, a management consulting and advisory services firm.

The market has seen the rise of a number of tech-enabled players including Cars24, CarDekho, Spinny, CarTradeTech and Droom, who are engaged in the sales, servicing and finance of used cars.

Sources: World Bank, OICA (Organization Internationale des Constructeurs d’Automobiles), IBB (Indian Blue Book), DRHP (Draft Red Herring Prospectus), Praxis analysis

Sources: World Bank, OICA (Organization Internationale des Constructeurs d’Automobiles), IBB (Indian Blue Book), DRHP (Draft Red Herring Prospectus), Praxis analysis

Even as the used car market gets more organised, tech players have ushered in a transparent, enhanced price discovery mechanism for both buyers and sellers. They also provide a seamless experience and better financing options through their captive arms.  

“The used-car segment is a supply constrained market. What tech players such as Cars24 and CarDekho have done is to create an organised sourcing network, which never existed before. This has aided price discovery for the seller. Five years ago, when people wanted to own a used car, they would have a range of quotes – one would say Rs 3 lakh and another would quote Rs 8 lakh. There was no mechanism to know the real market price. Now, with the listing and auction platforms of tech players, sellers have become more comfortable about the right price. Supply of good quality cars has also improved,” according to Aryaman Tandon, Managing Partner & Co-Founder, Praxis Global Alliance .

Speaking to BusinessLine, he said: “Currently, two-three per cent of used cars are sold by organised tech players such as Cars24, Spinny and CarDekho, similar to the e-commerce penetration we witnessed a couple of years ago. This number will grow to 20-22 per cent of used-car sales in FY26, which is projected at 8 million units, up from 3.9 million units in FY21,” he added.  

Customer behaviour trends led by lower ownership cycles and greater convenience will see tech players gain market share.  

The share of unorganised dealers is expected to drop to 30-35 per cent in FY26 from 45 per cent in FY21, while that of the C2C (customer to customer) segment is expected to fall to about 25 per cent i from 33 per cent in the same period.

The share of organised dealers will increase from 8 per cent to 30 per cent by FY26, with tech players accounting for 20-22 per cent share and players like Mahindra First Choice accounting for the remaining portion . OEM-backed organised players like Maruti TrueValue are likely to account for about 10 per cent, according to a report by Praxis Global Alliance.  

The used-car segment has also attracted funding of $1.3 billion in CY21, up from $168 million in CY18. Cars24 and CarDekho raised the highest funding of about 55 per cent of all investments in the used car space.  

“However, the used-car space is unlikely to see more than five-six tech players, including a couple of tail-end players focusing on select segments, with the leading players having 6-7 per cent share by FY26,” said Tandon. 

Published on May 16, 2022
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