Why the demand for used cars is increasing?

🔍Insights

Meghashree Das

Aug 28, 2020 — 6 min read

This Pandemic has brought many changes in our lifestyles and hence the market. One such change is the drastic increase in demand for a used car. But strangely, it’s much before the pandemic that the demand for a used car was so high. This pandemic has just fueled it more.

After India entered the BS-VI era in auto-industry from April 2020, the value proposition of the used cards is growing stronger. People in India have always been price-conscious. They are expecting cars to become expensive due to additional technology costs. Which has led them to opt for used cars rather than the new ones? And why not? When they are getting a better option for the same price as that of the new car !!

As per the MD and CEO of Mahindra First Choice Wheels (MFCW), companies are gradually focusing on reducing the production of diesel cars. After Maruti Suzuki decided to exit the diesel car segment by April 2020, the demand for compact diesel cars in the used car market showed a steep growth. Unless of course, there is a backlash against diesel cars.

The markets are dominated by the major players like OLX, Mahindra First Choice Wheels, Cars24, Maruti True Value, Hyundai H Promise, and others.

Some Factors, that affect the growth of the used cars in the market are:

Organized Channel Expected to Register Higher CAGR
Growing demand for luxury cars
Competitive Landscape
Increased Reliability
Reduction of the Ownership period

Organized Channel Expected to Register Higher CAGR

In the Indian market, the organized phase is anticipated to witness a CAGR growth of 22.79% throughout the forecast amount.

This marketplace for used automotive has seen vital growth over the last 3 years. This growth increase is especially driven by sales of used cars in railway system cities and an increase in online sales platforms, like CarDekho, Cars24, Droom, etc.

The majority of the OEMs have already entered the used automotive market. and people WHO didn't enter the used automotive market at the initial stage entered the market throughout the last 5 years. Renault started the pre-owned automotive business in 2015 and Nissan had entered the business in 2017.

Significant OEMs in the Asian country, like Maruti Suzuki, Mahindra, Hyundai and Toyota, and luxury automotive makers, like BMW, Audi, and JLR, have their used automotive network.
The sales have enlarged since 2017.

Consumers like safety, transparency, convenience, and low risk, whereas buying a second-hand automotive. that ought to act in favor of the organized sector. nevertheless, the unorganized sector occupies nearly eightieth of the whole market than the organized sector.

sales in organised sector vs un-organised sector

Growing Demand for Luxury Cars

One of the main reasons for the rise in the used automotive business is the demand for luxury cars. Before, owning a luxury automotive was accustomed to being a dream for the bulk, chiefly owing to money issues. however, this can be step by step dynamic, because the shoppers should buy used automotive.

Some major factors driving the expansion of the used luxury cars are as follows –

luxury cars have a high rate of depreciation worth,
youth driving towards higher model on low value
in urban cities, deprivation in finance management, and want quality product.
increase in the online marketplace for used automotive.

One of the major reason for the increase in used car business is the demand for luxury cars. Before, owing a luxury car was used to be a dream for the majority, mainly because of financial problems. But this is gradually changing, as the consumers can buy used car.

Reduction of Ownership period

Owners of the posh cars tend to unload their vehicles within a year or two. As they need for upgraded and higher models.
A few years ago , the possession amount was of 6-7 years for many cars. It's currently reduced to around four years and is predicted to dip additional to 3.5 years by 2021.
This directly impacts the availability of used cars in market and additionally in good shape. That additional has led in accessibility of alternative for the shoppers.

Competitive Landscape

Online Presence

Opening of on-line platform could be a major force behind a rise within the numbers of the used vehicles business. Conversion has conjointly been instrumental in organizing the used automotive business on-line that historically been aloof from the net area.

With the existence of on-line portals, customers are able to flick through variety of used cars that work into their budget. It's conjointly created the purchasers aware and able to search full regarding their future purchases yet.

Organised Players

The marketplace for used automotive in Asian country is generally commanded by major players like OLX, Mahindra 1st alternative Wheels, CARS24, Maruti True worth, and Hyundai H Promise. They have the biggest share of the market due to their business models and enlarged variety of pre-owned automotive shops.

Quikr, Honda automobile Terrace, Ford Assured, Toyota U-Trust, etc., are within the method of increasing their shops and operations within the native market.

Increase in responsibleness

Due to the increasing technological advances in the automobile sector, cars have gotten a lot of reliable.
A well-maintained automotive can simply run, not bothering for years. This means, even the second owner of the vehicle, will be assured of a hassle-free driving possession expertise.
Manufacturers are providing long pledge periods up to 7 years in some cases. This offer gives rise to the preference of shopping for a second user automotive. They get the advantage over manufacturing defects which will be treated with no overhead prices.

Statistics

The used automotive market in the Asian country was valued at USD 24 billion in 2019. And it's expected to register a CAGR of fifteen.12% throughout the amount (2020-2025).
The demand for used luxury cars has been growing at some thirty-fifth - four-hundredth year-on-year basis.
OLX's report shows, the used luxury vehicles whose value was Rs 15lakh or more were the foremost most popular alternative among the shoppers.
Every month over 55,000 luxury cars are listed. The provision for premium cars jumped by over fourfold in 2017.
According to the OLX automobile Note report, 38th% of the 4-wheeler listing consisted of top-end sedans and luxury cars.
Mahindra 1st alternative Wheels has recorded sales growth of four-hundredth throughout 2018-19. that registered a revenue of Rs 148 crore.
It is sold-out over 250,000 used cars throughout 2018-2019.
CarDekho has been in the number 1 position. Within the on-line used automotive market recording a Year-on-Year rate of regarding 100 percent over the last 3 years.

With COVID-19, folks are following social-distancing. While they're attempting to urge back to their family, folks are preferring personal transport over the public. and during this time of crisis, the economic resolution is to shop for a second-hand automotive