Moneycontrol
Sep 13, 2017 02:59 PM IST | Source: Moneycontrol.com

Despite cash ban used car market topped 3.6 million sales in 2016

Average selling price of a used car is Rs 2.75 lakh. This makes the pre-owned car market valued at nearly Rs 1 lakh crore.

BySwaraj Baggonkar
Despite cash ban used car market topped 3.6 million sales in 2016

India’s burgeoning used-car market saw sales of 3.6 million units last year, recording a growth of 9 percent over the previous year helped by a growing class of first-time buyers.

The growth came despite the negative impact of demonetisation in November, which as per a study done by Indian Blue Book by Mahindra & Mahindra, sucked out 200,000 unit sales. Otherwise the industry would have seen sales of 3.8 million units recording a growth of 15 percent.

The new car market during the same period grew by 9 percent to 3.04 million units from 2.78 million units, as per data shared by the Society of Indian Automobile Manufacturers.

While a majority of the used-car market comprises the unorganized segment the organised segment is catching up fast. As per the study just 15 percent of used car sales happen through physical dealerships. However, the organized segment is growing by 36 percent while the unorganised segment is grew by 12 percent.

Mahindra First Choice Wheels, the biggest company dealing in used cars, clocked a growth of 40 percent this year so far. “From around 9,000 units we have moved to 14,000 units sales a month this year so far. This is despite the effect of GST. We would be adding 50 new dealers every month from here on,” said Nagendra Palle, Managing Director and Chief Executive, Mahindra Frist Choice Wheels.

The Mahindra company presently has a retail strength of 1,425 dealers across 725 towns. Last year it clocked sales of 130,000 units through its dealerships while another 200,000 were auctioned through the e-Diig on-line platform.

At Mahindra First Choice Wheels the average selling price of a used car stood at Rs 3.5 lakh while for the industry it stood at Rs 2.75 lakh, according to Palle. This makes the pre-owned car market valued at nearly Rs 1 lakh crore.

Interestingly, three out of every five used cars sold are bought by first-time buyers. This means at an average buying price of Rs 3 lakh used cars are competing directly against entry level cars such as Maruti Alto, Renault Kwid, Hyundai Eon, Datsun Redi-Go and Tata Nano. Around 60 percent of used cars are less than 5 years old.

“Looking at the growth potential we have at hand we will take our dealer count to 2,000 by end of this year and to 4,000-5,000 dealers in 2-3 years. India’s used car market is expected to more than double to 7 million units in the next few years,” added Palle.

Looking at the headroom for growth Maruti Suzuki, the country’s largest car maker, recently decided to completely revamp its use car network of True Value.

The Delhi-based company, along with its dealers, will set up 150 brand new True Value outlets by March next year and take its tally to 300 in the next 2-3 years. These outlets will be digitally integrated through a portal so that customers can access details of all cars available at True Value outlets nationwide.
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