Used Car Market In India To Grow Significantly In Next Five Years: 2021 IBB Report

The last year's edition of the Indian Blue Book offers excellent insight into India's pre-owned car market, complemented by exhaustive data and analysis. And one of the key findings of the 2021 Indian Blue Book report is that the used car market is set to grow significantly in the coming years. In FY'20, the used car market in India was 50 per cent larger than the new car market and by FY'25, the used car market will be approximately 90 per cent larger than the new car market, with total used car sales forecast at 7.1 million units, having a compounded annual growth rate of 11 per cent.

Also Read: Used Car Sales Cross 4.2 Million Units In FY'20: IBB Survey

(Used car sales are going to increase many-fold in the next few years)

The used car to new car ratio could be seen as a representation of the maturity of the pre-owned car industry. In India, this ratio has held steady between FY2016-19 at 1.2x. FY'20 was a tipping point and pushed the ratio to 1.5x, which signified the beginning of a new era in the pre-owned car market in India. The trend has continued during FY'21 is expected to close at about 2.2x, meaning that the used car market will be 2.2 times the size of the new car market at the end of FY'21.

Also Read: Three Things That Impacted New Car Sales During COVID-19: IBB Survey

(The Covid-19 pandemic, organised trade, higher disposable income and low market penetration will be the key drivers for used car segment going forward)

The report suggests that some of the key drivers for growth during these five years will be the renewed interest in personal mobility, thanks to the COVID-19 pandemic, very low market penetration which is 30 cars per 1,000 people, increase in disposable income and a significant increase in supply in the used car market. In FY'21 the estimated size of the used car market was around 3.9 million units, although the unprecedented COVID-19 pandemic did cause the market to shrink by 7.1 per cent, compared to FY'20. In comparison, the new car market size in FY'21 was 1.8 million units, which was a drop of 36 per cent compared to sales in FY'20.

Also Read: 7 Benefits Of Buying A Used Car

(Indians consider used car purchase a smarter move than investing in a new car, especially during the pandemic)

The other important factor leading to a growth in used car sales is the shift from unorganised to organised trade. More and more car manufacturers now have authorised used car sales vertical, including premium car manufacturers as well. There is better trust, better facilities and more options to choose from, when buying a used car from an authorised outlet. Plus, buying behaviour during the pandemic is a clear indicator that Indians now consider buying a used as smarter investment over buying a new car, especially the middle-class India.