Used-car sales zoom on growing demand

The uptick in passenger vehicle sales in recent months has had a domino effect on the used cars market which is growing due to pent-up demand. Industry veterans predict the growth to continue in the coming months.

According to Shashank Srivastava, Senior Executive Director (Marketing and Sales) Maruti Suzuki India (MSIL), the growth was around 17-18 per cent in the replacement buying segment last year. It is now up 5-6 percentage points and fast approaching pre-pandemic levels.

“Last month it was 21-22 per cent. In the peak of the market in 2018-19 it was around 26 per cent. I think it will come back again,” Srivastava told BusinessLine. He said Maruti Suzuki True Value, which sells pre-owned cars, is growing in tandem with the aggregate growth in the industry.

Srivastava said demand from rural areas has gone up because income disruptions have been less steep than in urban areas. Secondly, investment by the government in rural areas this year is also the highest ever.

Used car market in India is expected to reach $50 billion by 2026, at a compounded annual growth rate (CAGR) of 15 per cent from the current $27 billion, industry data show.

According to financing companies, the demand for pre-owned cars has increased in the last couple of months. “Demand for used car is high because people are still conscious (due to the pandemic) and want to travel in their own personal vehicles, especially the small cars. In the last couple of months, things have improved...demand is holding up and supply has also started improving and therefore, I think the demand for pre-owned vehicles will continue for longer period,” Ramesh Iyer, Vice-Chairman and Managing Director, Mahindra Finance, said.

Niraj Singh, Founder and CEO, Spinny (retailing platform for pre-owned cars), also agreed that in 2022, the trend of personal mobility shifting steadily towards used cars continues to gain more traction.

“The affordability and easy availability of used cars is another big win for consumers, particularly first-time buyers. Young buyers are also preferring pre-owned cars than waiting for prolonged periods to purchase a new vehicle. As per year-end trend witnessed by Spinny, 57 per cent of first-time buyers favoured hatchbacks followed by sedans and they belonged to the age group of 25-35 and were majorly working professionals,” Singh said.

Luxury car market

The same trend is seen in the luxury car market. “We have seen 30 per cent growth last year and expect this it to continue in the pre-owned segment this year too. We don’t see any cannibalisation of our new car sales. Because of different price points, we get a lot of first time buyers in the market who later upgrade to a new car,” Martin Schwenk, Managing Director and CEO, Mercedes-Benz India, said.

Balbir Singh Dhillon, Head of Audi India, said changing market dynamics and the YOLO (You only live once) attitude amongst customers have given rise to the pre-owned car market, and that is why Audi India is expanding its used car business arm – Audi Approved Plus.

“We are expanding our Audi Approved Plus showroom network. We started 2021 with seven facilities and currently stand at 14, including recently inaugurated facilities in Ahmedabad, Nashik, Bhubaneshwar, Chandigarh, Ludhiana, Surat and Mumbai (South). We will expand facilities beyond 20 this year,” Dhillon said.

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