Used car market sees a continued interest from buyers amid Covid-19

2020 saw incremental growth for 1st-time car buyers, category up 3% for Maruti

Despite the pandemic and clouds of uncertainty in the broader economy, the used, or second-hand, car market in India is seeing a continued interest from buyers and customers across India.

Inquiries are up by almost 10 per cent whereas in the new car industry they are down by around 16 per cent, say executives at the country’s largest automobile manufacturer, Maruti Suzuki India.

Shashank Srivastava, executive director at Maruti Suzuki, said the current ratio of used cars to new cars had gone up from 1.4 to around 1.6 in the last couple years with the number of old cars being sold at 3.7 million last year, and every indication is that it could climb to around 4 million in the near future.

India’s used car market largely comprises organised players such as Maruti Suzuki True Value, Honda First Choice, Tata Motors Assured and also start-ups like Spinny and other unorganised players. The organised players account for around 20 per cent of the market, Srivastava said, specifying that about 55 per cent of the market is driven by consumer-to-consumer sales.

For Maruti Suzuki, volumes of pre-owned car sales are at around 420,000 units annually. For the firm, specifically, the used car division saw as many as 2.3 million inquiries in 2020, substantially up from the year before but sales had come down.

“Part of that was thanks to reduction in trade-ins,” Srivastava noted. Net exchange replacements were down by almost 20 per cent because buyers hit the brakes on purchases. However, the silver lining was the fact that the first-time buyers who were migrating from two-wheelers to cars entered the category of first-time car-buyers. The first-time car buyer category went up by 3 per cent for Maruti.

Suraj Ghosh, who leads Powertrain & Compliance Forecasts, IHS Markit, says the growing number of organised used car channels available is more than ever before. “Worries on tampered odometers are no longer a concern. Quality cars with warranties and maintenance records are all transparently available,” he said.

For example, Maruti Suzuki doesn’t sell cars that have, for instance, had more than two owners. The second factor is that car buyers would earlier have a mindset that they had to buy a new car but that’s evolved to a more open consumer preference,” Ghosh says.

Other analysts say that cars with automatic transmissions have been gaining popularity in the used car market, and are expected to grow in double digits over the next few years.

Further insights into the used car market show older cars coming into the system now with the average age of vehicles at around nine years versus eight years earlier, say executives with Maruti, adding that the trend is possibly on account of slower sales last year and purchases being deferred. The more significant trend is in the growth of first-time buyers.

First-time buyers are now 70 per cent versus 62 per cent in 2018-19, Srivastava said, attributing the growth to lower income levels, buying upward from two-wheelers, and safety concerns due to the pandemic as well as new buyers propelled downwards to lower segments.

The average price of cars less than seven years is Rs 3.3 lakh and include top sellers such as the D’Zire, Baleno and Swift while the cars that are older than seven years are priced at around Rs 1.60 lakh and lower, Maruti officials say, adding that at a regional level the company saw a fall in sales in Maharashtra and Gujarat as well as West Bengal, where the crash was almost 12 per cent.

Volumes stayed strong in Uttar Pradesh.