The used car volume is expected to cross 6 million units in FY26, logging a growth of 8-10% year-on-year (y-o-y), amid value-conscious demand, rising digital adoption and better access to finance, according to a report by Crisil Ratings.
Around 5.6 million units of used cars were sold in India in FY25. In comparison, 4.1 million units of new cars were retailed in the country during the fiscal.
As per industry experts, the new car volume is expected to witness a low, single-digit y-o-y jump in FY26.
With a handsome rise in volume, the used-to-new ratio in car sales has increased to 1.4 from less than 1 five years ago, with the volume growing more than twice as fast, the report said, adding that the market value of the used cars is estimated to be around Rs 4 lakh crore, nearly matching that of new car sales.
The report said that although the organised players in the segment have been incurring high operational cost towards refurbishment, logistics and financing as the sector is in an expansion mode, resulting in continued cash losses, the strong revenue growth is expected to drive breakeven at the operating profit level over this and the next fiscal. "Until then, credit profiles of players will largely depend on timely fund-raising and sustenance of adequate liquidity to support growth," it added.
Crisil Ratings Senior Director Anuj Sethi said that the improvement in the used-to-new car sales ratio signals a structural shift, driven by rising consumer confidence and digital adoption. "The supply too remains strong with average age of used cars steadily dropping and is expected to reach around 3.7 years, reflecting quicker upgrade cycles and growing preference for utility vehicles, mirroring new car trends," he noted.
However, India's used-to-new car sales ratio of 1.4 is still behind those of markets such as the US (2.5), the UK (4), Germany (2.6), and France (3).
While the used car segment remained stable even during the pandemic and semiconductor shortage, it is again expected to remain resilient as prolonged rare earth magnet shortages delay new car deliveries, prompting buyers to opt for pre-owned cars and gain quicker access, according to the report.
Besides, first-time buyers have a wider range of used car models to choose from, supported by healthy new car sales in the post-pandemic period. "To top, improving access to vehicle finance, through lender-platform partnerships and underwriting, driven by artificial intelligence, is likely to support this shift," the report said.
"High cost of customer acquisition, logistics, and refurbishment continues to weigh on the operating margin, which remains thin or negative for many players. However, the shift towards integrated service offerings, including inspection, refurbishment, financing, insurance, and doorstep delivery, along with tighter cost control, should help narrow the losses down gradually," said Poonam Upadhyay, Director, Crisil Ratings.
The organised players have collectively raised over Rs 14,000 crore via equity since FY19, though over the past two fiscals, they have shifted focus to enhancing profitability and efficiency and have been selective in fund-raising, as per the report.
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