The pandemic, the shortage of chips, the desire for upward mobility are driving demand.
India’s used car market is growing at a higher percentage than new cars. According to a Frost & Sullivan report, used car sales were estimated at 3.8 million units versus 2.6 million for new vehicles in FY21. That gap is expected to widen to 8.2 million used cars versus 3.9 million new vehicles by FY25. The study reveals that first-time buyers accounted for 64% of these used car owners. This is partly because people want to hone their driving skills via used cars before moving on to new ones. Although divided into organized, partially organized, unorganized and customer-to-customer groups, the used car segment in India has grown steadily.
But what is driving the growth of the used car market? Multiple factors are driving this, including economic factors, the need for personal mobility as people seek to avoid public transport and shared mobility due to health issues, and the desire for upward mobility , among other reasons.
All four segments of the Indian used car market contributed to the sales growth. In the organized sector, these include traditional automakers and start-ups, all of which have seen steady growth in sales. The affordability and easy availability of used cars is another major draw for consumers, especially first-time buyers, who prefer to hone their driving skills on used vehicles before moving on to buying new vehicles. .
The other driving force is a greater supply of used vehicles. Since many white-collar workers who own more than one car still work from home, they prefer to sell their second vehicle given the limited use. The new vehicle scrapping policy has also led to an increase in used car sales, as those who have been forced to sell their old vehicles have preferred to opt for used cars, as these offer a better value for money than the new ones.
Owners have also reduced their length of ownership of a new car to 3-4 years, which was higher before. The continued shortage of semiconductors has severely affected automakers and new car deliveries are delayed for months due to supply constraints. Naturally, people looking for personal mobility opt for used cars at an early stage. Younger cohorts of aspiring car buyers also prefer buying used cars rather than waiting to buy a new vehicle.
In addition to this, other reasons for the increase in used car sales are the trust and transparency that online retail players have fostered among potential buyers through better offers and related benefits. For example, a comprehensive used car platform allows potential buyers a 360-degree view of all vehicles listed on its portal, as well as home inspection and in-home test drives. A wide range of vehicles is also available for selection.
New era used car retailers also go the extra mile by carrying out comprehensive checks on every vehicle before they put them up for sale online. Therefore, each vehicle undergoes a 200-point assessment to ensure it is fully roadworthy and safe before it is listed online.
Buyers also enjoy a one-year after-sales warranty on used cars to solve any after-sales problems. This includes a fixed-term money-back guarantee, fixed-price insurance, and in-home car inspection. Buyers receive a full history of each selected vehicle, which includes service and repair details. Subsequently, buyers are assisted with the relevant documentation and the transfer of ownership of the car. In the event buyers wish to take out a car loan, they are helped with the terms and the loan is facilitated by an appropriate private or public sector lender.
Another decisive advantage is that buyers are offered a realistic assessment of a car’s condition as well as a value for money price. On many occasions, buyers receive great deals when cars in excellent condition that have only been used for a few months are sold by their original owners simply because they want to upgrade to a new vehicle.
A report by Mordor Intelligence states that the Indian used car market was pegged at $27 billion in 2020. At a CAGR of 15%, it is expected to touch $50 billion by 2026. There is no doubt that the market is set to rise further milestones in the coming years.
The author is the founder and CEO of Spinny.