The Indian used car market was valued at USD 27 billion in 2020, and is slated to extend to USD 50 billion by 2025
The used car market in India has been receiving unprecedented attention in recent times. The ongoing pandemic situation, diminishing purchase power and long waiting period for new cars due to shortage of spares and other factors, has driving up the demand for used cars in India.
A recent study conducted by VW India along with research firm Frost & Sullivan, the pre-owned car sales are currently 1.5 times that of new car sales and this is set to increase in the years ahead from a current ratio of 1.5:1 to 2.1:1 by FY2025.
In FY2020, the pre-owned car market recorded 4.4 million units as against 2.8 million units of new passenger cars sold in the same period. The study also projected sales of 8.2 million pre-owned cars in FY2025, compared to 3.9 million new vehicle which will be purchased in the same year.
What Drives the Pre-Owned Car Market?
The pre-owned car market is preferred by buyers in India primarily due to its affordability. This trend is more popular in Tier II and Tier III cities. Buyers can avail of multiple financing options, own more premium models within a budget and are also assured of reliable vehicles that have undergone a thorough check with offers of warranty and service packages. The coming four years will also see demand for used cars from smaller towns increase from 55 percent to 70 percent
The number of pre-owned car sales in comparison to new car sales have been seeing a steady rise. In F17, as compared to 3.6 million used car sales, there were 3.1 million new cars sold. This increased to 4 million used car sales in FY16 as against 3.1 million new cars sold.
FY21, the year in which the pandemic hit both the used car and new car markets, this count stood at 3.8 million used car sales as compared to 2.6 million units of new car sales. The Study estimates the FY25 figures at 8.2 million (82 lakh) used car sales to 3.9 million (39 lakh) new car sales.
When assessing pre-owned car sales from 12 cities in Tier I and Tier II areas it was seen that 64 percent of buyers were first time car owners. Those pre-owned cars in the sub Rs.5 lack segment are most in demand with 70 percent buyers as against just 10 percent buyers opting for pre-owned cars in the over Rs 10 lakh segment. There is also some demand seen for pre-owned cars in the Rs.1-2 lakh range (16 percent) and in the Rs.2-3 lakh (20 percent) and Rs.3-4 lakh range (16-17 percent) among which are models such as the Maruti Alto, Datsun Redigo and Renault Kwid.
Greater trust is put on outlets such as Maruti Suzuki True Value and Mahindra First Choice which have 1,252 outlets and over 1,700 touch points respectively. Volkswagen, too has its Das WeltAuto (DWA) network of 140 outlets for sale of its own range of pre-owned cars which is set to increase to 150 touch points by later this year.