Demand for used cars rises in the Indian market

Thursday 01 August 2013, 12:04 PM by

In recent times, the Indian auto market has seen a trend wherein people are preferring to buy used cars as compared to the new ones. This was revealed in the statistics recorded for the year 2012-2013, when the domestic buyers purchased the same number of new and pre-owned cars. Reports suggest that during 2012-2013, around 2.69 million used cars were bought, which reported an increase by 22.3 percent compared to the last year. On the other hand, there was a growth of only 2.2 per cent in the sale of new cars with 2.68 million units being sold.

Industry experts feel that this change in preference of people might be based on a number of reasons. Used cars have a lower cost, which is something that is always bound to attract the price sensitive Indian buyers. Also, there has been an exponential increase in the number of establishments that sell pre-owned cars. These organisations offer warranty and are quite trustworthy, as well. Strangely, the demand for new cars is on a decline whereas the sales count for old vehicles is rising steadily.

Industry experts are of a view that chains that deal in the sale and purchase of second hand cars are not likely to be the divisions of existing automobile manufacturers. According to statistics, these chains have a share of around 15 per cent in the market of used cars. On the other hand, there are other companies as well, which do not come under any auto firm like CarNation, a firm promoted by Jagdish Khattar, ex-Maruti Suzuki Chief, is one such example.

One of the biggest name in this business is Maruti True Value, an entity that recorded sales of around 231000 units during 2012-13. On one hand where used car sales increased, the demand for new cars declined by around 7 per cent. Mahindra & Mahindra owned entity Mahindra First Choice is expecting to clock sales of around 60000 units along with a growth of 35 to 40 per cent as compared to the last fiscal year, during which it delivered around 46000 units. Mahindra First Choice has a target of hitting above 100000 units for 2016-2017.

“The volatility in the pre-owned car business is much less as compared with new car sales. Whenever new car sales go up we benefit. But whenever they go down, we do not go down as badly. This year, due to our new centres we will show robust grow but the overall pre-owned car industry may not grow as much as last year,” said Rajeev Dubey, the Mahindra & Mahindra's President for Corporate Services.

Also, there is growth in supply from the banks as the number of re-possessed cars has gone up. “The number of individual users putting up their cars for sale has (on the other hand) gone down,” he further added.