The Indian used car market is visibly unaffected by the economic downturns and slow industry growth, with sales actually surging ahead by 22 per cent, as compared to the new car sector. As per reports, the sales of second hand cars has been growing steadily in numbers throughout the economic slowdown, whereas the brand new car market suffered from dwindling sales figures in the same period. At present, the Indian used passenger car market is projected with sales of 2.5 million units per year and is worth an astonishing Rs. 52,000 crore. Industry sources believe that the second hand car market could hit the 8 million units mark by the end of 2017.
As per the data generated by Crisil, the Indian used passenger car market has climbed up at a Compound Annual Growth Rate (CAGR) of 22 per cent, from 1 million units recorded during Financial Year (FY) 2007 to 2.6 million units in FY 2012. Further, the second hand car sector is estimated to grow at a CAGR between 22 and 24 per cent, over the next five years from 2012 fiscal till 2017 fiscal.
Commenting on the elementary differences between used and new car markets, Nagendra Palle, Chief Executive Officer (CEO), Mahindra First Choice Wheels, the used car segment, Mahindra and Mahindra Ltd., was quoted as saying, “Typically the new car market is far more sensitive to economic ups and downs than the used car business. When the financial crisis hit the US three years ago for instance, new car business dropped by nearly 40 per cent but used car business took a 15 per cent hit.”
Expressing his views on the future market projections in used car market, Palle further added, “The estimate is that by 2017, the used car market in India will be around 7.7 million units strong. Worldwide the used car market is typically three times the new car market but in India the ratio is still 1:1.5 new versus used car sales so the potential for growth is very strong.”
Palle informs that for any new car sale in the price band nearing Rs. 4 lakhs, a used car can be purchased at an average of just half the cost (new car), somewhere around Rs. 2 lakhs. As per estimates, the Indian used car market will stand strong at 8 million units y the end of 2017, with both unorganised and organised retail operators. Palle said, “At a ticket size of around Rs. 2 lakh per car, the average used car sale price is half of that of new car sales where the average ticket size is around Rs. 4 lakh per car.”