Second-hand car dealers reckon this financial year to be better than the previous one, with the segment being more resilient to the slowdown. In contrast, new-car sales slumped for the eighth consecutive month in July, impacted by the sluggish economy.
“The assumption is that used cars are as good as new and, with the slowdown in the industry, price-conscious and low-budget customers are increasingly looking at buying second-hand cars,” says Sunil Gambhir, Head (Business Development), Honda Cars India. “There is aggressive demand coming in from tier-III cities, while sales from other cities have also increased.”
In a testimony to the growing market for used cars, Honda expects to sell 900-1,000 cars this fiscal through its certified programme, Honda Auto Terrace. This is more than double the 438 cars it sold last year. Honda intends to buy and sell about 30,000 vehicles, compared with 12,000 a year ago.
Greater churn
The story is more or less the same across the pre-owned car segment. Mahindra First Choice Wheels expects to sell about 65,000 used cars in FY14 — a 40 per cent increase from 46,000 vehicles sold a year ago. And to cater to the rising demand, it expects to add another 100 outlets, taking the total number to 353 in FY14.
“The impact of the economy tends to be more muted in the used-car segment, which is more resilient than the new-car market. The resilience comes from the churn (shorter ownership cycles)…,” says Nagendra Palle, Chief Executive Officer at Mahindra First Choice Wheels.
“With improved quality of vehicles and a wider variety of brands available, there is also a greater acceptance of used-car ownership among consumers,” Palle added.
Under its assured pre-owned car programme, Tata Motors sold 96,827 cars, while Maruti, through its True Value outlets, sold more than 2.50 lakh in FY13. Neither company provided a forecast for the current year.
The demand for pre-owned cars is much better than that of new cars and the presence of organised players is a shot in the arm for the sector. Moreover, the quality of second-hand cars has also improved.
Diesel models preferred
Increasingly, diesel models are being preferred due to the government’s fuel pricing policy.
Swift diesel, Dzire diesel, Toyota Innova and Fortuner fetch the highest resale value. However, in urban areas, hatchbacks such as Swift, i10, i20, Figo and WagonR and petrol cars are preferred.
“There are more buyers than sellers in the market today for pre-owned cars. For every brand new car sold in the market, 1.2 pre-owned cars sell,” says Jagdish Khattar, CMD, Carnation Auto. His firm, which sells 300 cars a month, will have about 50 outlets by the end of this fiscal.
“The acquisition cost of new cars has increased due to the rise in excise duty and road taxes. A used car turns out to be good value for money. More and more households in India now opt for a second car as it works out to be a good option,” says Suvajit Karmakar, CEO, ALD Automotive Pvt Ltd.