Small towns drive up sales of used cars amid slump

SALES OF PRE-OWNED CARS ARE ESTIMATED TO INCREASE TO AS MANY AS 4.4 MN UNITS THIS FISCAL FROM 4 MN IN THE PREVIOUS FISCAL

MUMBAI: India’s used car market is booming at a time when the domestic automotive industry is battling one of its worst sales slump.

The demand in used cars is being driven by smaller towns and cities as stricter regulations, especially on emissions, and changing consumer preferences in major cities lead many to discard their older cars for new vehicles.

Sales of pre-owned cars are estimated to increase to as many as 4.4 million units this fiscal from 4 million in the previous fiscal, according to used car dealer Mahindra First Choice Wheels. Online classifieds platform OLX India has an almost similar sales forecast of 4.4-4.5 million units.

Mint spoke to several organised and stand-alone used car resellers, all of whom expect the current surge in sales of used cars to continue because of new regulations as well as changing consumer tastes.

“Car owners in metropolitan cities change their vehicles faster. Secondly, when government notifications ban vehicles such as petrol cars older than 15 years and diesel cars older than 10 years in Delhi-ncr, where do these vehicles go? They are sold in the used car market, refurbished and then sold again in the smaller cities and towns,” said Ashutosh Pandey, chief executive of Mahindra First Choice Wheels, the used car selling arm of Mahindra and Mahindra Ltd. He said Delhi-ncr, Mumbai and Bengaluru comprise the bulk of supplies of used cars.

Sunny Kataria, vice president of auto at OLX India, said demand for used cars from tier-ii cities increased 10% in the second half of fiscal 2019.

“While supply of pre-owned cars largely rests on tier-i cities, the demand for the same is increasing in the tier-ii and smaller cities,” Kataria said.

India’s used car market can be broadly categorised into OEM (original equipment manufacturer) retail franchisees, classified players, consumer-to-business and other transactional platforms.

Robust demand for used vehicles comes at a time when the automotive industry is experiencing sharply weakening demand.

Passenger vehicle sales in India plunged 32% from a year earlier in August to 196,524 units, according to the Society of Indian Automobile Manufacturers (Siam). It was the 10th straight decline in monthly passenger vehicle sales and the worst since Siam began compiling monthly sales data in 1997-98.

Lucknow-based Wasim Khan, owner of three used car garages, said that although consumer spending is on the decline, car buyers do not want to compromise on their aspirations to own big cars with new features such as connectivity in infotainment systems, sunroofs and even airbags. “They want all that in second-hand cars within their budgets,” said Khan, who bought some diesel cars last year from Delhi Ncr-based owners such as Fiat Linea, Volkswagen Vento, Tata Safari, Mahindra Scorpio and Honda City.

Shubh Bansal, co-founder of Truebil, a four-year-old online startup for used vehicles, said: “There are several hyperlocal parameters that drive the preowned car market, which remains largely unorganized. The demand-supply equation matters a lot in this space”.