In India, used car market has surpassed the new car market share due to various causes. The COVID-19 crisis led to a 17.8% decrease in recent car sales in FY20, while used car sales grew by 5%. Indian used car sales have currently surpassed new car sales by 1.5 times. The gap is set to expand in the coming years.
Pre-owned car sales are increasing steadily due to a combination of factors, including cost, availability, a rising need for personal mobility, and the rise of online pre-owned car marketplaces.
Current used-car market situation
Majority of used car players are now focusing on online lead generation. However, some of them are still focusing on physical car sales through independent, organized, and unorganized dealerships, and C-2-B market. These segments have a combined effect on India's used car sales graphs.
A few well-known manufacturers like Maruti Suzuki, Mahindra & Mahindra, and Tata Motors have their own specialized pre-owned car sales channels. New Auto Tech businesses are rising to disrupt the used car market due to digital transformation. Pre-owned car sales have grown in popularity online, boosting the number of pre-owned vehicles sold online.
Factors influencing pre-owned car sales
The Indian used car market has created a wealth of possibilities for price-conscious consumers. The outbreak of the COVID-19 pandemic has resulted in customers becoming more value-conscious, allowing new competitors to enter and organize the market. Also, used luxury and imported cars are now more affordable. Pre-owned cars are becoming more popular with buyers due to greater transparency and ease of transferring the ownership of vehicle.
Change in consumer behaviour
Customer demand is the driving the used car market's growth. When it comes to buying a new car, the cost depreciates by 30 percent in the first year of purchase, making used cars a more value for money proposition. Consequently, buyers are also going for used cars since it is more affordable.
In addition, the ownership period of cars has reduced drastically from six to eight years in the past to just 4 years now and is likely to fall to 3.5 year in the next several years. It has resulted in a dramatic increase in the availability of pre-owned vehicles.
Personal mobility is becoming increasingly popular
Drop-in use of public transportation due to COVID-19 pandemic and aspiration to use personal transport are one of the two most popular reasons fuelling the growth of used car market. People who formerly relied on public and private buses, carpooling, or shared services are now focusing on personal modes of transportation. Social distancing norms have become a significant concern for residents in metro and even non-metro cities. If there is any uncertainty in the future, people from a wide range of socioeconomic origins are likely to buy a used car.
Convenience and affordability for the customer
India's used car market was already experiencing an incredible digital change when COVID-19 arrived, accelerating the rise of Auto Tech players. The new-age firms in this industry have combined their online presence with physical locations to provide better service to customers.
In non-metropolitan regions also, there is a great demand for pre-owned cars. Buyers are also able to easily search and buy a used car online that meets their needs and budget. Customers can completely view the car with new-age technology like 360-degree view, augmented reality, and virtual reality. Certified used cars are now offered with repurchase/extended warranties, detailed vehicle history, and resolving post-sale concerns are all features that online players are offering.
With current chip shortage and pandemic, we expect used car market to grow even more in the future.