Used automobiles: An opportunity for organized players to seize

Surprisingly, the used automobile market is larger than the new car market in India and around the world. In addition, it is anticipated that the market for used cars will expand more quickly than that for new cars. The Indian used automobile market was controlled by the unorganized sector ten years ago.

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Nonetheless, Maruti opened “Maruti True Value,” the nation’s first organized used car dealership, in 2001. In the used car market, the organized sector’s stake increased from 4% in 2007 to 15% in 2017. This was concurrent with the growth of e-commerce, which made it easier for internet marketplaces to enter the used automobile industry. A number of companies have entered the used automobile e-commerce market, including Cars24.com, Droom Technology, Carnation Auto, Cardekho.com, Carwale.com, Cartrade.com, and Olx. In 2021–2022, the organized sector made for 20% of the used car market. According to Indian Blue Book forecasts for 2021–2022, the used automobile market would increase at a compound annual growth rate (CAGR) of 12.7%, while the new car market is expected to rise at a CAGR of roughly 7% over the following five years.

Used cars have the primary benefit of being more reasonably priced.

Used automobiles also have lower insurance prices and a slower rate of depreciation. Used automobiles are a viable alternative because millennials have a strong desire to switch cars often. Organized players in the used automobile industry have a lot of promise. Just 8.8 lakh of the 44 lakh secondhand cars sold in India in FY22 went through official channels (Indian Blue Book).

Over the course of the next five years, it is anticipated that the organized sector’s share of the used car market will rise from 20% to 45%.

Moreover, India’s overall car penetration rate is substantially lower than that of other nations globally.

This gives the used automobile market plenty of room to grow.

In comparison to non-metro areas, the supply of secondhand cars is substantially more than the demand in metro areas. Those who are well-organized can be quite helpful in bridging this gap.

There are two segments that comprise the organized segment of the used car industry. Players sponsored by original equipment manufacturers (OEMs), such Hyundai H Promise, Mahindra First Choice Wheels, and Maruti True Value, make up the first category. Online players like Cars24, Cardekho, and OLX Auto are included in the second group.

The internet players have gained a substantial amount of market share, even if the first category players still benefit from advantages including strong infrastructure, well-established service centers, appealing exchange policies, and brand loyalty.

They are using a valuation model based on the anticipated expansion of the used automobile category to capture market share by offering high prices for old cars. This model, nevertheless, might not be viable and ought to be reconsidered.