Used-Car Sector Is Getting More Organised And Professional At A Rapid Pace, Say Industry Experts

The used car sector has players from both organised and unorganised backgrounds with Independent multi-brand channels thriving in such a market. One major player in this space is Volkswagen India, and the German carmaker has big plans for the expansion of its pre-owned car business, Das WeltAuto, and eyes a larger pie in this space. So, we spoke with Ashish Gupta, Director, Volkswagen India, Avik Chattopadhyay, Founder of Expereal, a brand consultancy agency, and Sridhar V, Partner, Grant Thornton Bharat LLP to understand the fluctuations in the used car space and what it holds in the coming years.

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Sridhar V, Partner, Grant Thornton Bharat LLP believes personal mobility has gained a lot more significance among the commuting public, especially after the pandemic, and one of the segments which has benefited a lot is the segment of the used car. He said, “Various research and the transactions in the used car segment indicate only a bright future for this segment. Understandably, India has still not reached the high ratio of per capita ownership of passenger vehicles seen in many developed countries. While that highlights the potential for growth in additional ownership, the role of the segment of the used car in the incremental addition is expected to be significant.”

VW Das WeltAuto Excellence Centers

The unorganised used car sector is still a large chunk while we see newly organised as well as unorganised players emerging rapidly. Ashish Gupta, Director, Volkswagen India says the pre-owned side of the business is facing a supply shortage as the demand for pre-owned cars is concentrated on young used cars that have done not more than 50,000 km and are not older than 3-5 years. And that is exactly where the number of cars available is very less.

However, the used-car sector is getting more organised and professional at a rapid pace. According to Avik Chattopadhyay, Founder of Expereal, a brand consultancy agency, “All automakers have the used-car channel as an integral part of their customer offer and business plan. Independent platforms have also become mainstream alternatives to the automakers as they are multi-branded and offer more choice to the prospect.”

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Gupta has similar views and feels the growth in the used car industry is more than the new car industry. He said, “Since 2020, the need for personal mobility has not only increased to the new car side but a lot of the action is on the pre-owned side as well. If I remember my figures correctly, the growth in the used car industry is more than the new car industry this time and this is what we see also.”

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The unorganised segment has also picked up a cue or two in providing a unique proposition to the buyers including personal attention. The cost of ownership of the used cars and the financing options which are available has made it an attractive option for PV buyers. For ones affected by the post-pandemic economic situation and the need to conserve cash, this segment has provided a viable and commercially comfortable option.

Gupta said, “You would have already seen that the price for a used car now has gone up by 5-7 per cent in this year itself. It is a good thing because that makes the business model for the pre-owned cars more lucrative. So, yes, the used car business is quickly outpacing the new car business and then there is the accessibility to used cars than new cars.”

However, VW India has managed to make a mark for itself in this space. Gupta added, “The used car space has two aspects- unorganised led by brokers, dealers, online players, etc and then there are organised players led by OEMs, which has a share of about 18 -20 per cent currently, up from 8-10 per cent recorded last year. In this organised OEM-led used car space, we command a market share of 2.5 per cent, placed among the top five in the country.”

Mahindra First Choice Wheels is India's leading used auto platform business which is organizing the market by aggregating demand and supply.

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Sridhar, on the other hand, believes luxury cars would also play a vital role in the used car space. He added, “It is also seen that luxury cars have found a unique set of buyers mainly due to attractive pricing and being affordable in comparison to new cars while the cost of ownership has only been increasing.” They have gained credibility in the market by supporting discerning customers on the evaluation of the vehicle and some with warranties thrown in for a reasonable period (especially the OEM and large organised players).

Avik also touched upon the growing fuel price and the increase in the price of new cars, resulting in the growing interest in the used car space. He said, “Any mature automotive market has a thriving used-car segment that is as organised and professional as the new car one. Independent multi-brand channels thrive in such a market. India is seeing the same over the last 3-4 years with new cars becoming more expensive due to input costs and the basic running costs going up due to fuel prices.”

VW Das WeltAuto Excellence Centers is placed among the top five OEM-led used car businesses in the country.

With the current state of flux about electric vehicles, a quality used car till the clouds clear over EVs is the most practical option. Hence, the used-car market could evolve further in terms of more independent players entering it, the existing platforms becoming more flexible in offers, and the automakers also using their used-car channels in retaining customers.