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Pre-owned cars gain on growing aspirations

Pre-owned cars gain on growing aspirations

Aparna Dutt Sharma, Chief Executive Officer, IBEF

Dec 01, 2014 3:19 PM

From a relatively insignificant share of overall car sales at the turn of this century, the used car market in India has steadily gained momentum over the past decade. According to latest data by Frost & Sullivan, used car sales are expected to be at par with new car sales this year, registering sales of around 2.5 million units each.

A key driver for this rise in used car sales is the growing preference for used cars among first time car buyers. Market research firm JD Powers estimates that the share of first time car buyers going for used cars has increased to 17 per cent in 2014 from just 4 per cent in 2011. A lot of these first time car buyers are young and are eager to purchase premium sedans and hatchbacks from the used car market as opposed to new entry level cars.

Customers have also steadily gained confidence in used cars due to the earnest efforts of players in the organised segment. In 2006-07, around 96 per cent of the used car market was dominated by unorganised players and customer- to-customer sales, according to a report by CRISIL, which rose sharply to 16 per cent by 2011-12, according to CRISIL. These players have made transactions more transparent and also ensured fair prices for both buyers and sellers. They also offer critical benefits like quality check processes, easy financing, motor insurance, complete paperwork and post-sales service. Among the leading players, Maruti Suzuki’s pre-owned car business True Value is known to have grown by 36 per cent year-on-year during the first half of 2014. Toyota’s used car division UTRUST is known to be recording a brisk CAGR of around 20 per cent over the past few years while Mahindra and Mahindra’s used car business First Choice is known to be growing at four times the pace of its new car sales.

Internet penetration has also been a critical driver, with around 65 per cent of car buyers searching online before making their purchases in any major Indian city today. The concept was started in 2007 by eBay India Motors. Of late, two major online marketplaces – Quikr and OLX – have permitted sellers to post free ads for their used car sales. Another interesting model for promoting used car sales is the auto mall. A number of such malls that are exclusively catering to automobile sale, purchase and display have come up, offering transparent deals and a plethora of options.

The market for used cars has burst on the scene and exposed a whole new customer base. Presently there are over 750 used car outlets in India while the demand is estimated to be for at least 3,500 to 4,000 outlets. With growing incomes with aspirations and players committing themselves to ensuring a rewarding customer experience, the pre-owned car revolution in the country seems to be just unfolding.

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