Spike in pre-owned SUV demand fuels used-car market boom

Representation Image (Credit: Mahindra First Choice)

Prabin Kumar, a Delhi-based doctor, wanted to dispose of his hatchback and upgrade to a midsize Sports Utility Vehicle (SUV). After mulling numerous options, he settled for a 2024 edition of Kia Seltos, which was just 5 months old and driven for just 2,000 km by the previous owner.

He noted that the model was offered for Rs 14.25 lakh (on-road, Delhi), about Rs 5.5 lakh less than its brand-new version. “It is a near-new car to me. I specifically went for an SUV because of its high ground clearance. Unlike a sedan, SUVs can navigate through potholes of Delhi, NCR roads.”

Thanks to people like Kumar, the pre-owned SUV market is on an upsurge. Available across various price points, the price of a refurbished SUV can vary depending on the model, age, usage and condition of the vehicle.

Some of the best-selling models in that category include Hyundai Creta (Rs 1.47 - 22.99 lakh), Tata Nexon (Rs 2.50-16.50 lakh), Mahindra XUV500 (Rs 1.80 -19.90 lakh), Mahindra Scorpio (13,000 to Rs 20.11 lakh), Mahindra Thar (Rs 50,000 to Rs 20 lakh), and Renault Duster (starting at Rs 1,68,000).

Interestingly, even though Ford doesn’t sell any new cars since 2021, its discounted SUV EcoSport, which is offered in the range of Rs 3.5-6.5 lakh (depending on the variant and condition) in the used car market, still attracts reasonable buyers.

Dissecting the market

Thanks to the rising demand for SUVs, the pre-owned car market in India is also poised for a 7-10 percent growth over the coming few years. As per the latest edition of Indian Blue Book (IBB) report by Mahindra First Choice Wheels Ltd, the overall used-car sales went up from 4 million units in FY 2019-20 to around 5.1 million units last fiscal and are poised to reach 5.6-6 million units by FY25. The report claimed that the Indian used-car industry was valued at $32.44 billion in FY23 and will more than double to $73 billion by FY28.

Mahindra First Choice, which is also India's largest multi-brand pre-owned car company, claims that the share of SUVs in the pre-owned car market is expected to more than double from 18 percent in FY19 to around 40-45 percent by fiscal year-end.

Ashutosh Pandey, CEO of Mahindra First Choice, said, “The change in consumer behaviour, introduction of affordable mid-size SUVs, increased disposable income of the consumers, travelling patterns of the consumers (more weekend trips by families than ever before) and value of money are the main reasons for increase used SUV sales.”

According to him, the Average Selling Price (ASP) of an SUV has increased from Rs 4 lakh to Rs 5.4 lakh now. While Scorpio and Creta were its top selling models, there are a lot of bookings of Maruti Brezza, XUV500, Tata Nexon (ICE version), Hyundai Venue, Kia Sonet, etc, he said.

Growth at the cost of new mini cars?

This rise in the sale of pre-owned SUVs comes at a time when the volumes of new entry-level cars, which are available in a similar price bracket, are on a sustained decline.

As per the Society of Indian Automobile Manufacturers (SIAM), the mini passenger car segment saw sales plummet around 40 percent year-on-year in 2023-24 to just 1,52,000 units. This is significantly below the 4,71,000 mini cars sold in India during 2018-19, before the pandemic struck.

This is the smallest and most affordable and fuel-efficient segment in the PV market. Some of the popular mini cars are Maruti Suzuki Alto, Tata Tiago, Renault Kwid, etc offered in the price range of around Rs. 2.5-4.5 lakh (ex-showroom).

“The aspirational young buyers want to start their innings on wheels with bold and beautiful SUVs and are moving away from buying new hatchbacks. This is also because these days used cars are easily accessible at different trusted portals at attractive deals. This is also making consumers move to SUV as it’s just a click away from them,” said Puneet Gupta, Director, S&P Mobility.

Pandey acknowledged that used cars are looked at by consumers while considering a hatchback.

“This is largely due to better value for money. The base price of hatchbacks has increased significantly over the years, and there are more reliable cars in the market than ever before with better engineering quality and build, wider awareness, and efforts by used car brands to provide a two-year warranty, buyback guarantee and access to previous owner’s service history,” added Pandey, who is also the author of the IBB report.

Autotech companies jump on the bandwagon

A lot of new-age start-ups, which are in the pre-owned car business, are also counting on SUVs over other segments.

For instance, Cars24 has claimed that it has seen a substantial increase in the share of SUV sales, doubling from 10 percent to 20 percent over the past couple of years. Standout models such as the Brezza, Sonet, EcoSport, XUV300, Taigun, and Tiago have become favourites among its customers, the company said.

“The market now offers a broader variety of SUVs at different price points, making them more accessible. A significant portion of this growth is coming from Tier II and III cities, where consumers are increasingly opting for larger, more premium vehicles. SUVs cater to diverse lifestyles,” Gajendra Jangid, Co-Founder & CMO of CARS24.

In the first quarter of 2024 alone, SUVs experienced a remarkable 40 percent increase in sales, he said. “We are confident this positive trend will continue, and we anticipate SUV sales to exceed 50 percent in the coming years,” he added.

Similarly, Spinny, another used-car portal, witnessed a substantial 20 percent increase in first-time buyers within the SUV segment in the Q1 CY24, marking a significant rise from 10 percent during the same period in 2023. In the second quarter, the compact SUV segment was the highest-growing category with 12 percent growth over the last quarter.

All not smooth sailing

Despite the buzz, the used-car industry is still largely consumer-to-consumer (C2C) and unorganised. The unorganised segment still makes up roughly 45 percent of the market; with the organised segment being 20 percent and C2C transactions being 35 percent, as per the IBB report.

“The organised segment is growing rapidly owing to consumers wanting refurbished, certified cars with warranty and hassle-free buying and ownership experience. By FY27, we expect 45 percent of the industry to be organised,” said Pandey of Mahindra First Choice.