Chip Shortage Has Helped Boost Demand For Pre-Owned Luxury Cars: Industry Players

The impact of the global shortage of semiconductors has been quite massive. Automakers in India, and across the world have been facing major setbacks due to production losses and declining sales, and the luxury segment is no exception. However, for luxury carmakers, this dark cloud situation does seem to come with a silver lining, mainly with regards to their used car business. In a recent interview with Business Standard, BMW Group India CEO, Vikram Pawah said that the global semiconductor shortage has inadvertently provided an immense boost to the pre-owned car market, as the brand is experiencing high additional demand.

Also Read: Vehicle Retail Sales Drop 5% In October 2021; Dealers Sees Worst Festive Season Numbers In Last Decade

BMW Group India CEO, Vikram Pawah says the prices at which customers are willing to secure a pre-owned BMW has increased

Talking about the pre-owned car business, Pawah said, "BMW cars consistently command good resale value in the pre-owned car market. With the current situation, we are experiencing high additional demand, which is reflecting in the market prices as well. The prices at which customers are willing to secure a pre-owned BMW has increased." The India head of the Bavarian carmakers further added that since the launch of its pre-owned car business - BMW Premium Selection - in 2012, the company has seen an over 200 per cent growth in used car sales.

Also Read: Buying A Used Luxury Car: Pros And Cons

To see how the competition is doing, we even reached out to Mercedes-Benz India. Commenting on the impact of chip shortage Martin Schwenk, MD & CEO, Mercedes-Benz India said, "We experience stress in the global supply chain and see some impact due to the shortage of semiconductors. We are actively mitigating the effects, however, combined with the strong demand for our products, a lot of our models now have a waiting period." Adding about its impact on pre-owned car market, he added, "With the integration of e-commerce and launch of 'direct to customer' MB Marketplace, our Pre-Owned Car (POC) business has been scaling up and witnessed a good demand in the market. We expect the demand for the POC segment to increase next year as well."

Martin Schwenk, MD & CEO, Mercedes-Benz India says he expect the demand for the pre-owned cars segment to increase next year as well

Sharing his views on the growth forecast for pre-owned car sales, Schwenk added, "Our pre-owned car business has seen strong traction even during the pandemic and we continue to have a strong growth forecast for the POC segment in 2022. We are further planning more business initiatives in the pre-owned car business to further accelerate the projected growth. With MB Marketplace, we plan to add additional 1000-1200 units to our POC sales volumes from next year. We also project a penetration level for online sales to increase up to 30% by end of the current year."

Big Boy Toyz's Founder & CEO Jatin Ahuja says due to the long waiting period of new cars due to chip shortage there has been a shift in demand from new cars to pre-used cars

To get a better grasp of the current situation of the overall premium used car space, we even got in touch with multi-branded luxury used car sellers like Big Boy Toyz. Sharing similar views as Pawah, Jatin Ahuja, Founder & CEO, Big Boy Toyz said, "Considering the long waiting period of new cars, there has been a shift in demand from new cars to pre-used cars. Customers are opting more for pre-used cars, increasing sales of these cars" He further added, "The demand for the newer models, mostly the cars which are one- or two-year-old has increased during this time."

Also Read: Pre-Owned Luxury Car Segment To Play A Pivotal Role In Post-COVID Era: Industry Experts

Sumit Garg, MD and Co-Founder, Luxury Ride says while there has been boost in sales, there are few challenges as well like procuring enough vehicle to match the increased demand

On the other hand, Sumit Garg, MD and Co-Founder, Luxury Ride said, "There has been a boost in the sales after the shortage of global semiconductor especially during the festive season as people tend to buy something auspicious to celebrate." However, also said that there are few challenges as well like procuring enough vehicle to match the increased demand. Mainly considering decline in new car sales will adversely affect the used car market as well in the long run. "Though, after this issue is solved, say 4-5 months then also it will take time to get the business on track because in our business if a person buys a car, and sells it then only we could sustain and park it in our showrooms which take a lot of time to get back into the cycle," he added. He also added that used car prices have increased by 5-10 per cent.

Industry experts say that the pre-owned luxury car segment will play a pivotal role in the post-covid era.

The COVID-19 has in a way helped the used car business in India, especially the pre-owned luxury car segment. Soon after the first wave of the coronavirus pandemic, industry experts and leading players have already said that the pre-owned luxury car segment will play a pivotal role in the post-covid era. Especially the organised pre-owned car business, which has some inherent advantages that attract the buyers like certified vehicles and warranty plans, similar to new cars.

BMW Quote Source: Business Standard