By Vidyut Kumar Ta
MUMBAI: Indian consumers seem to be betting big on used cars compared to brand new vehicles. The demand for used or pre-owned car market is witnessing traction in metro cities and is expected to touch a scale of over 70 lakh vehicles by FY2025-26, an increase from 38 lakh in FY 2020-21.
According to a recently concluded OLX Autos-CRISIL Study 2021, the pre-owned car segment will be growing at about 12-14 percent over the next few years. The study also indicated that the segment is likely to clock a 15 percent growth during FY2022, thanks to changing demographics, first-time buyers, aspirations, digitalization, and easy auto loan options during the new normal.
Amidst the pandemic-induced economic conundrum, a major change was witnessed in consumer behavior where people plumped for pre-owned cars over new ones majorly to cut costs and preclude the extra financial burden of shelling out taxes. The study said it would lead to double-digit growth of about 15 percent by FY2022 in the pre-owned car market.
For now, the forecast remains upbeat in the future. The segment is expected to garner a growth of 12-14 percent over the next few years, scaling the market size of over seven million units by FY2026, from 3.8 million vehicles during FY2021-22.
According to Amit Kumar, CEO, OLX Autos, “The choice for personal mobility has impelled a massive spin in the used-car sales prospected, which is projected to grow twice over new car sales in the next five years.”
The digital transformation has been advantageous as it has fostered renewed transparency, reliance, and preference for New-Gen vehicles among consumers.
The study further stated that the pandemic harmed the market and witnessed a sweeping change in the consumer demand to own personal vehicles. This trend is unlikely to fade away shortly.
With the advent of ridesharing players like OLA and Uber, several customers had initially given away the idea to own personal vehicles, mainly in leading metro cities.
At the peak of the first wave, supply crunch and greater demand quelled the stock level of pre-owned cars across the South and the West region, where inventory levels dipped to about 30-35 days from the usual 45-50 days.
Meanwhile, the supply levels are stabilizing gradually with lesser restrictions, improved mobility, and lower reluctance to sell vehicles. Compared to pre-COVID levels, the demand increased to about 20-30 percent soon after the unlocking in 2020. The demand was more evident in the southern region of the country, followed by the West. However, post lockdown, the demand growth remained relatively truncated in the eastern part. The epidemic also saw sudden traction for smaller, cheaper, and fuel-efficient cars.
The study further found a rise in choice for utility vehicles. The share in the pre-owned car market saw an increase of about 20 percent in FY2021, an increase from 18 percent in FY2018.