A Used Car Now Sold For Every New Car Purchased In India – The Economic Times – 25-Nov-2014
November 25, 2014 - Uncategorized
The Indian car market may still be facing the dismaying prospect of reporting a drop in sales for two consecutive calendar years, but demand for used cars is on the rise as several first-time buyers now consider second-hand vehicles. Carmakers Maruti Suzuki, Toyota Kirloskar and Mahindra & Mahindra have all reported impressive growth in their used-car business.
For every new car sold in the country so far this year a used car was also sold, according to consultancy and market research firm Frost & Sullivan. It expects sales of both new and used cars to be 2.5 million units each this year. In developed markets, the ratio of new passenger vehicle sales to used passenger vehicle sales is 1:3.
According to global market research firm JD Power, the percentage of first-time car buyers considering used vehicle in the country has increased to 17% in 2014 from just 4% in 2011. The rise in used car sales comes at a time when new vehicle sales are struggling. India’s annual passenger vehicle sales dropped for the first time in 11 years in 2013 and even this year trends show flat, if not lower, sales.
“Due to high inflation as well as interest rates, the positive sentiments have not resulted in increase in the new car sales,” said Abdul Majeed, partner at PwC India. “Meantime, first-time car buyers are postponing new car purchases and going either for two-wheelers or used cars,” he added.
JD Power has suggested that the young customers are turning to the used car market to jump segments and purchase sedans and premium hatchbacks over entry-level cars.
Maruti SuzukiBSE -1.82 % India’s pre-owned car business True Value recorded a growth of 36% in the first half of this year while Toyota’s used car division UTRUST has been growing 20% in the past few years. “Customers do consider used vehicle as an alternative option and this has been an increasing trend in the recent past,” said N Raja, senior VP and director for sales & marketing at Toyota Kirloskar. Mahindra First Choice, the pre-owned vehicle business of M&M, is growing four times faster than the new car sales, said Nagi Palle, CEO at Mahindra First Choice Wheels. While the new car market has grown 4%-5% so far this fiscal, MFC has grown about 20% year-onyear, he said. Palle estimates that the organised used car space has grown at about 15%.
At present, mostly entry-level car buyers go for pre-owned cars. Industry insiders cite two main reasons for the growth in used-car business. First, economic uncertainties have made many prospective firsttime car buyers cautious about spending money, hence, many are actively considering used cars. Second, most carmakers have developed a branded used car business that allows customers to buy pre-owned cars certified by original manufacturers and backed by warranty. “In challenging times of inflation, high interest rates and high fuel prices, many first-time buyers also seek preowned cars,” said Rakesh Srivastava, senior VP at Hyundai Motor India.