PRE-OWNED SEGMENT LIKELY TO NARROW VALUE GAP WITH NEW CARS BY FY27: OLX-CRISIL STUDY

India’s pre-owned car market is expected to narrow the gap in value terms with new cars over the next five years. This is on account of a changing mix increasingly skewed towards utility vehicles (UVS) that command better value, reveals a latest study by OLX Autos and CRISIL Research.

The value of the pre-owned car market is likely to touch ~4.3-4.5 trillion by 2026-27 (FY27), while that of new cars is expected to be worth ~6.6-6.8 trillion in the same period.

The gap was more pronounced at the end of 2021-22 (FY22). It was ~1.8 trillion for used cars and ~3.3 trillion for new ones, observes the study.

Over the next five years, while the compound annual growth rate in used cars in terms of unit sales is likely to be 15 per cent, it is estimated to be 20 per cent in value terms, OLX Group Chief Executive Officer Amit Kumar told Business Standard.

“This is because the mix of cars coming to the market is shifting in favour of UVS. Moreover, the prices of new cars are headed north,” said Kumar. The share of UVS has gone up sharply in the used-car segment over the past five years – from 17 per cent in 2016-17 to 22 per cent in FY22 and expected to rise further to 32 per cent by FY27. The growth in UVS has come at the expense of sedans and vans.

According to Kumar, while some of this has also come at the cost of small cars, the latter will remain a favourite of the value-conscious firsttime buyers.

Small cars still account for a good 58 per cent in the overall pre-owned market (FY22) and will only see a marginal drop of around 200 basis points by FY27, he said.