Market Trends of India Used Car Industry
Rising Middle Class and Young Population
A rising middle class and India's young population are two key factors driving this massive growth over the next five years. This is also fueled by the fact that India's disposable income has steadily increased over the years. According to the report, factors such as technology-driven transparency, convenience, transaction simplicity, and so on will also contribute to this projected growth. The average car age has decreased by 33% from six years in the fiscal year 2010-2011 to four years in the fiscal year 2021-2022.
With more players entering the market, India's used-vehicle industry is transitioning from an unorganized, setup where transactions occur via roadside garage mechanics, small brokers, and between car owners - to an organized system.
The reduced average tenure of ownership for cars and two-wheelers due to higher disposable incomes, as well as the introduction of new models in shorter time frames, are also aiding the sector's growth. When the global scenario is considered, India remains far behind. In FY2021-2022, an estimated 4.4 million used cars were sold in India, while 80 million used cars were sold in the United States, China, the United Kingdom, Germany, and France.
Factors responsible for Indian consumers choosing used vehicles over new vehicles are a need for mobility for personal and business growth, budget constraints and macroeconomic uncertainty, progressive industry players offering refurbished, certified, high-quality cars with warranties, digital & AI-led transformation increasing convenience, trust, and transparency, and the value for money nature of used cars when compared to new cars. The emergence of organized online and physical used car platforms, combined with an increase in demand for personal mobility and favorable government support, are also expected to drive growth. For instance,
- November, 2022: The CarTrade Tech-owned company now intends to open many more locations by the end of 2023. Furthermore, CarWale abSure is working on a slew of new product initiatives to improve the process of digital vehicle buying and selling through collaborations with OEMs, Banks, NBFCs, Dealers, Insurance companies, and other ecosystem players.
Growing Demand for Luxury Used Cars to Play Key Role in the Market
The Indian used car market is expanding due to rising demand for luxury vehicles. The sale of used luxury cars increased by 20%.
Due to the high cost of a luxury car, it was difficult to obtain one until recently. However, this trend is changing as consumers can now purchase used luxury vehicles. With easy access to financing options, annual maintenance contracts, and lower entry prices, the market is becoming more organized. Furthermore, the average age of used luxury vehicles entering the market is between 2 and 3 years, versus 5-6 years for a mid-size or small-scale vehicle, making them a better option in some cases.
According to auto dealers, demand for pre-owned luxury cars has increased by 35-40% year on year, as owners of luxury cars typically sell their vehicles after a year or two and upgrade to better models.
Initially, the market for pre-owned luxury vehicles was limited to major metropolitan areas. Local dealers and online players, on the other hand, have expanded the market. Customers in tier 1 and tier 2 cities can currently inquire about and purchase these vehicles. According to Big Boy Toyz, more than 33% of used luxury vehicle purchasing inquiries come from areas other than the home city.
Factors such as rising consumer preference for luxury vehicles and the country's youth preference for market leaders are expected to drive demand for used cars in India during the forecast period. For instance,
- In September, 2022, Volvo plans to expand its certified used-car business across India by early 2024, with this segment accounting for up to one-third of total volume. Volvo operates its pre-owned car business globally through the 'Selekt' platform, which it recently launched in India with two dealerships.
