Used car market to grow to 7 mn units by 2020

Chennai: India's pre-owned car market is expected to hit the 7 million units mark by 2020 said a just-released study by IndianBlueBook.com. According to the report, the used car industry — tipped to hit 3.3 million units this fiscal — is growing at 15% clip, almost double the growth trot of the new car market. By 2020, both the used and the new car market in India will be among the top 5 global automotive markets said the survey.

The survey — which leveraged Mahindra First Choice Wheels' franchise network — found that just under half (45%) of all pre-owned cars sold are in metros while non-metros account for over half (55%) the pre-owned car volume sold. Non-metro markets are growing faster than their metro counterparts. In geography terms, the North leads the pre-owned car market in India at 36% of the used car pie followed by the West (27%), South (26%) and East (11%).

"Organized players today make up 12% share of used car volumes and 19% share of dealerships and are the fastest growing segment at 25% a year. The non-metro markets are a bigger geography (though more fragmented) and are growing faster through the organized channel. The total used car dealer count in metros is 11,340 of which 800 are organised. The total dealer count in non-metros is 18,580 of which organized dealers are 1,310," said Nagendra Palle, MD & CEO, Mahindra First Choice Wheels.

Even in terms of vehicle preference, the same brands rule both metros and non-metros. "Non-metros have more dual use vehicles for both personal and commercial applications and there are more diesel vehicles than in metros where petrol rules now but the great metro-hinterland divide does not really exist," added Palle.

According to the study, around 50% of used car buyers are in the 25-34 years age segment and the average age of a pre-owned car at the time of sale is around 4 years with average ticket size of Rs 3-4 lakh.. There are four primary market segments in the used car space — the organized segment comprises 12%, the semi-organised segment commands 35%, the customer-to-customer segment is 34% and the unorganized is 19%.

Like that of the US, the pre-owned car market in India is larger than its new car market (1.2X). China's pre-owned car market, though larger in volume compared to that of India's, is less evolved at 0.5X that of its new car market, said the report. India's motorization rate lies at 22 cars/1,000 people compared to over 800 cars/1000 people in the US which has a car parc that is 10X that of India. "There is significant headroom for pre-owned car financing," said Palle. "Pre-owned car finance penetration in India is under 15% while that for new cars is approximately 65%. Finance penetration is significantly higher within the organized channel (40% across the metros and non-metros), while the semi/unorganized channel is highly fragmented with higher channel costs for lenders," he added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.