Pre-owned car business pips new car sales amid COVID-19: Report

In the ongoing pandemic period, the passenger vehicle market saw a huge recovery from the March 2020 fall. Looking at the current position, the Indian PV vehicle is estimated to have closed FY21 with total domestic sales of 2.65 million units. This is in fact a fall of 4% from last fiscal pushing back the car market to FY 15 levels.

Amid the COVID-19 crisis, the used car market industry witnessed a notable rise in comparison to the new car market, as the pandemic pushed the demand for personal mobility albeit budget constraints.

According to Mahindra First Choice Wheels, in FY2021 second-hand car market sold of 3.9 million units, against 4.2 million units in FY20. Even after the pandemic, the FY2021 volumes are still better than FY18 when the industry saw sales of 3.8 million units.

Currently, the second-hand car market is 1.5 times of the new car industry and according to estimates and is expected to grow to 7.1 million units by FY25. The fall in the used car market in FY 2021 is due to the non-availability of the stock as demand is still high for them. The volumes of the preowned car market are expected to close at 2.2 times the volumes of new cars by FY2025.

According to Ashutosh Pandey, CEO and MD, Mahindra First Choice Wheels, buyers preferred to go for low-cost deals to meet their mobility needs as public transport was considered dangerous to life due to the covid-19 situation.

“The challenge in supply got worsened during FY21 due to the slowdown in new cars pertaining to demand and supply, rising preference for used cars in place of public transport and cab services, and mis-match in demand-supply of top-selling cars in the used market such as Mahindra Scorpio, Swift Dzire, Baleno, Hyundai i20, etc”, he said.

The car lovers who generally used to sell their car after a certain period have kept holding onto them due to the coronavirus situation. Moreover, the used car industry saw a higher supply of those models, which do not enjoy big demand leading to a demand-supply mismatch.

Swift, Wagon R, and Dzire from Maruti Suzuki and i10 and Grand i10 from Hyundai were the most preferred choice among used car buyers. An average Indian preferred to bring home these preowned cars below Rs 3 lakh. Also, the new car ownership cycles have come down to 4.5 yrs in FY2020 from 6 yrs in FY2011.

Buying cars online has emerged as the big trend during the pandemic with a 175 percent surge in inquiries for second-hand cars says Grant Thornton. Organic searches grew by 40% between Jan 2020 to Jan 2021 across all digital platforms in India which is further only expected to rise.