The country’s used car market is projected to grow at a CAGR of 18 per cent in value terms, during 2017-2022. Increasing affordability and growing need for automobiles are the prominent factors expected to drive the Indian used car market, says TechSci Research.
Growing focus of OEMs towards setting up used car networks in different parts of the country and increasing inclination of consumers towards used cars, owing to their affordability and improved after sales services are some of the major factors expected to boost demand for used cars in India through 2022. According to TechSci Research, Indian used car market has reached to a 1:1 ratio today, ie one used car sale to one new car sale every year.
So, what has led to this astonishing growth of the Indian used car industry? Let’s have a look!
Decrease in average time period for keeping a car
With increasing disposable income in the country, car buyers are shifting from a new car to another in a relatively lower period. This has significantly reduced the average time for keeping a car in India.
The average time has come down from 6-7 years to just 3-4 years, consequently, allowing second-hand car buyers to get a well maintained and comparatively newer car. Due to this, inclination of the current generation towards used cars is increasing day by day.
Increasing penetration of online channels
Growing penetration of internet and smartphones in the country is allowing online channels such as OLX, Quikr, Carwale, etc, to increase their reach to a greater audience. After the introduction of these online channels, C2C sales of used cars have grown significantly in the country, as these channels act as a marketspace for used car sellers and buyers to get in contact with each other. Owing to these channels, dealers/individuals are expected to expand their used car market from local to PAN India.
Customers get a wider choice of vehicles for the same budget in the used car market as compared to the new car market. In the used car market, a middle-class family can afford a used mid-sized sedan at the price of a new small hatchback. This factor is shifting the focus of Indian middle-class towards the used car market.
India’s used car market has provided a marketplace to middle-class families and individuals where they can afford sedans and SUVs at the prices that are significantly lower than that of the new cars. Figure 1 shows share (in volume) of different types of vehicles in India’s used car market in 2017 and forecast growth in 2022.
Earlier, unorganised sector accounted for a major share of used car market in India, and consumers of used cars faced a lot of problems during and after the purchase of cars, which demotivated the growth of the industry. However, entry of OEMs has led to an exponential increase in the share of organized sector, allowing consumers to avail benefits like that of new cars such as after sales service, warranty, complete check-up of cars, etc on the purchase of used cars.
TechSci Research predicts that with the entry of several car manufacturers in the used car business, the used car market is expected to move towards an organised status. Owing to increasing share of the organised sector in the used car market, focus of Indian consumers is anticipated to shift towards used cars.
Challenges on the way
In spite of huge growth potential, Indian used car market faces many challenges.
Jatin Ahuja, Founder & Managing Director of Big Boy Toyz, states, “The Indian used car market is expected to be 1.5 times the new car market over the next five years.”
Moreover, according to Ahuja, the share of used cars in the overall passenger car market in India has reached to a 1:1 ratio today, ie one used car sale to one new car sale every year. The company expects to register tremendous growth in Maharashtra, following the opening of a new showroom in Mumbai in June 2018. As a brand, Big Boy Toyz is expecting a decent revenue share from the Maharashtra market this year, says Ahuja. Table 1 shows used car market size (in volume) in Maharashtra in 2017 and forecast growth in 2022.
TechSci Research projects that the Indian luxury used car market to grow at a robust CAGR of over 22 per cent, reaching over $ 11 billion by 2022. In 2017, Maharashtra accounted for the largest volume share of over 12 per cent in Indian used car market, with Mumbai dominating the state’s used car market. Same trend is expected to continue during the forecast period. Growing demand for automobiles and their increasing affordability in the state are some of the prominent factors aiding the used car market of the state. Figure 2 forecast India’s luxury used car market share (in volume) by sales channel by 2022.
According to Karan Chechi, Research Director with TechSci Research, Indian used car market is gradually shifting its focus from small cars, owing to increasing inclination of Indian public towards crossovers, SUVs and sedans. “Growing disposable income and purchasing power of Indian buyers coupled with a decrease in the average time of keeping a car in India is enabling the country’s used car market to grow at a phenomenal rate,” said Chechi.
As per the TechSci Research latest report, the country’s used car market is projected to grow at a CAGR of 18 per cent in value terms, during 2017-2022. Increasing affordability and growing need for automobiles are the prominent factors expected to drive the Indian used car market during forecast period.
The Indian used car market is expected to be 1.5 times the new car market over the next five years. The company expects to register tremendous growth in Maharashtra.
- Jatin Ahuja,
Founder & MD, Big Boy Toyz
with the entry of several car manufacturers in the used car business, the used car market is expected to move towards an organised status.
Table 1: Maharashtra’s used car market size (in thousand unit)
Article courtesy: TechSci Research, a research based global management consulting firm
For details, contact Kalpana Verma (Senior Marketing Consultant, TechSci Research)
Growing disposable income and purchasing power of Indian buyers coupled with a decrease in the average time of keeping a car in India is enabling the country’s used car market to grow at a phenomenal rate.
- Karan Chechi,
Research Director, TechSci Research