Like Shan, there are a few buyers who moved into a used car for the first time as a precaution to save money.
“Almost 50% of car buyers buy for the first time. They begin their journey as car owners by buying a used car at an affordable price. I think it will be about 10% in the price range from 2 to 3 lakhs of Indian rupees, from 15% to 3 lakhs of Indian rupees to 4 lakhs of Indian rupees and from 20% from 4 lakhs to 5 lakhs of Indian rupees and so on. ” – says Vikram Chopra, co-author. Founder and CEO of Cars24, a leading online platform for buying and selling used cars.
In India, the used car business remains largely disorganized as only about 15% of the business is owned by institutional players such as True Value owned by Maruti Suzuki, Mahindra First Choice, Hyundai Promise, Honda Auto Terrace and other used car businesses. OEMs.
According to True Value, the demand for used cars skyrocketed during the pandemic, and the preference for personal mobility grew stronger and stronger. Maruti True Value has seen a 6% increase in searches in 21 fiscal years. True Value, which is celebrating its 20th anniversary, has sold nearly four million vehicles since its inception in 550 retail outlets in 274 cities.
“The used car mission shifted from personal to family where the main purchase was additional family cars (additional family purchaser contributed 36%),” says Shashank Srivastava, CEO of Maruti Suzuki India and head of the used car business.
Maruchi Suzuki informed ETAuto that during the current pandemic, searching for used cars on the Internet has become phenomenal, as requests to the MSIL True Value website accounted for 67% of the total searches in 2020-2021.
Amid growing preference for personal mobility and the low base effect of the last fiscal year, used cars are expected to grow by more than 15% in fiscal 22, according to global research and consulting firm ICRA.
“Demand for 4-wheeled vehicles will continue to grow due to concerns about the spread of the virus, and the unlocking has just begun, many states have extended the lock until mid-June, but the flow of requests even during the lockdown gives us confidence in more volume,” he said. Srivastava. …
In the used car segment, organized players will grow much faster than the unorganized segment, ICRA stresses.
The share of customer requests for replacement dropped to 17% in FY21 from 21% in FY20.Shashank Srivastava, MSIL
P&S Intelligence reports that India’s used car market is expected to grow from $ 18.3 billion in 2020 to $ 70.8 billion in 2030, with a CAGR of 14.8% from 2021 to 2030 year.
Another consultancy Frost and Sullivan, in its mid-term survey of used car volume, says that by FY25, India’s market will be between 8.2 and 8.5 million units per year, with about 4.4 million units now. This is more than twice the volume of the new car market, 2.1-2.2 times. (This sentence is ok)
Vikram Chopra spoke about the main motivation of customers: there are buyers who can get the same car with a 30-40% discount, and there are some who do not want to understate their budget, but want to buy a better car. … Almost 50% of consumers buy a better car on the same budget. The rest goes to a used car to cut the budget.
For MSIL, the share of the self-employed segment rose, while the hired class declined during the Covid period. This could be the result of new work from home culture. Family and business contributions increased to 38% and 7% in fiscal 2021, up from 30% and 5% in prior fiscal years, respectively.
A similar trend was observed with Mahindra First Choice.
Mahindra First Choice Matrix for Buyers
Showing significant economic impact, the proportion of first-time buyers of used cars dropped to 57% in fiscal 21, down from 80% in fiscal 20. The proportion of people looking to buy a used car as an additional family car increased to 36% in fiscal 21 from 14% the previous year.
According to True Value, NCR, Mumbai, Pune, Hyderabad and Bangalore are among the top 5 cities for used car sales. “The price range for a used car on our platform ranges from Rs 2 lakhs to Rs 6 lakhs and up to Rs 15 lakhs,” says Vikram Chopra.
Price-based True Buyer Profile
Nearly 95% of used car buyers are looking for a car in the under 5K INR range in True Value as they only sell Maruti Suzuki brands. Of these, 65% buy at a price within 2 lakhs of Indian rupees, and only 1% buy used cars worth over 7 thousand Indian rupees.
However, for multibrand used car retailer Mahindra First Choice, the INR 5,000 to INR 7,000 price range accounted for 22% of total sales in FY21, up from 17% in FY20.
As for Cars24, about 10% of buyers buy from 2 to 3 lakhs of Indian rupees, 15% – for 3-4 lakhs of Indian rupees and 20% – for 4-5 thousand Indian rupees and so on.
Mahindra Price-Wise Sales Decay
In terms of customer preferences, Vikram Chopra said, “When someone wants to buy a used car, I think he / she thinks about the two most important things. First, will I find the car I’m looking for? And secondly, will I get a car with my characteristics, such as a model that has not traveled more than 30,000 km in this color, or not older than this color, and so on. ”
Problems on the way
Even though industry experts predict significant growth in the demand for used cars in India, a number of inherent challenges remain, ranging from affordability, meeting customer preferences and demand, and increasing the cost of registering old cars.
According to MoRTH’s draft notice, an individual will have to pay up to INR 5,000 to renew the registration of a vehicle over 15 years old – nearly eight times the current price.
Likewise, for imported vehicles over 15 years old, the proposed renewal fee is INR 40,000. In addition, a green tax is levied on used cars. Experts practically denied the impact of the increase in registration fees on demand.
“Increasing registration fees and renewal fees for used vehicles over 15 years old will affect the valuation of used vehicles, especially those over 12-13 years old. However, most of the transactions are with vehicles registered in the past 10 years, and therefore their resale price is unlikely to have a significant impact, ”said Ashish Modani, vice president and head of the corporate ratings sector at ICRA.
Kaushik Madhavan, vice president of mobility for Frost & Sullivan South Asia, also said: “I don’t think re-registration or scrappage fees will have any significant impact on the used car market as the average ownership period for a first life is shrinking. Very few customers will keep their vehicles for 15 years. ”
Declining new car sales can create supply-side problems. As with last year, people are still thinking about keeping their cars for a longer time, which has resulted in the buyer’s supply share of offer replacement requests dropping to 17% in FY21 from 21% in FY20. said Shashank Srivastava.
Vikram Chopra said that as consumers pay attention to increasingly sophisticated features and new options, they are increasingly upgrading their vehicles, which means that the supply of used cars is increasing. However, the situation could take control if new car sales increase this year and remain stable over the next two years.
“Besides, there has always been demand. The problem was delivery. As supply began to increase as consumers increasingly sell their cars, demand has existed for years to meet the increase in vehicle availability, ”he said, adding that the average life expectancy of a new car with a first owner is about four years. In larger cities like Gurgaon, Delhi or Mumbai, there are consumers who sell their cars even after two or three years. The national average is about four years.