As per the CEO of OLX Autos India, Amit Kumar, the preference of customers to move from a new car to buying a used car has improved drastically and with this potential, the used cars sales might be over 1.5x more than the sales of new cars. The factors lead by pandemic supply eruption and increased customer research and time invested in looking for a new car, the space of second hand cars is being captured by new-gen companies that are data driven and look to cater the young audience amongst all.
In December 2020, the sale of used cars in India have grown more than 50% when compared to the same period last year. As per a recent study, by 2025-26, the Indian used-automobile industry is predicted to have grown to over 70 lakh vehicles, up from 38 lakh in 2020-21, with a growth rate of 12-14 percent over the next several years. With the emergence of ride-sharing companies such as OLA and Uber, many potential customers have deferred their plans to buy a new vehicle as mathematically, it is cheaper for them to use taxi services compared to costs of owning a vehicle.
The Society of Indian Automobile Manufacturers (SIAM) has expected that the market might grow at 10% CAGR by 2024. The entire market is divided into four segments: Organized, Semi-Organised, Unorganized and Customer to Customer. There was a sudden increase in sales of used cars when the tight lockdowns were withdrawn by the government and people wanted a personal mobility vehicle. On the other side of the coin, people also wished to hold on their new purchases in fear of another outbreak or lockdown and wanted to have some disposable cash for their monthly expenses.
When comparing new and used cars, used autos are substantially more affordable. People are saving their disposable income for healthcare expenses in a time when the economy is shaky, jobs are at risk, and a severe financial crisis looms. At the same time, the demand for personal mobility is growing, and buying a used car for less money than buying a new one appears to many customers to be a better option.
A fair estimate is frequently used to determine the selling price of a used car, taking into account depreciation value, overall vehicle condition, and other factors. More often than not, secondhand automobiles are in good shape, particularly those sold to upgrade to a new model or those driven mainly in the city. These are a great deal.
At present, almost all of used cars sales pour in from organized dealers. In 2020, the United States and the United Kingdom had a used car to new car sales ratio of 2.8:1 and 4.1:1, respectively, among the world’s major automotive markets. China, on the other hand, had a substantially lower ratio of 0.6 in 2020. This, according to the Frost & Sullivan analysis, is due to “a lack of established structure for supply, evaluation, and price for used cars” in the Chinese market.
The startup space for used cars is gaining steam as well. In the year 2021, three startups- Droom, CarDekho and Spinny have become Unicorns (valuation above $1 Billion).
Spinny’s valuation had more than doubled to $1.8 billion in just 6 months when it secured $283 million earlier this month. In December, Cars24’s market capitalization increased by 60% to $3.3 billion in just three months. In October, CarDekho concluded the first leg of its ongoing pre-IPO growth funding round of up to $200 million. Droom closed the first leg of its ongoing pre-IPO growth funding round of up to $200 million.
With the global used cars market valued at $828.24 billion in 2019 and projected to reach $1,355.15 billion by 2027, India caters to a large audience which has been very price conscious and income elastic to demand. The recent semiconductor shortage has further increased the disruption in supply for new cars. Along with the aim to completely bring the unorganized and semi-organised sector to the organized sector, the growing marketplace in India for used cars paces at its full potential to become a strong sector in this decade.
Finance graduate with a strong desire to understand the complexities of financial markets. I make financial judgments for my investments based on the information I gained during my academic education. I write articles about financial literacy for dstreetanalyser.com in order to promote financial literacy among the general public.