Upsurge in sales of used cars triggers expansion of Mahindra First Choice

Company says 70% of business comes from metros but small towns are crucial

Mahindra First Choice Wheels Ltd (MFCWL), the multi-brand used vehicle retailer of Mahindra Group, is ramping up its presence across India and has set a target to open 200 new dealer franchisee to its existing network of 530 dealers.

Speaking to Business Standard, the Chief Executive Officer and Managing Director of the company, Nagendra Palle told that profit in the past five quarters, 29% year-on-year growth in FY 2013-14 and 35% CAGR by volume in 2014-15 has triggered the rapid expansion plan for the used car selling entity.

In March this year, a fund amounting to $15 million was raised from San Francisco based investment advisor firm, Valiant Capital, for a minority stake in the company to accelerate the expansion plan, he informed.

He reckoned 64 dealers having 138 outlets and repeat requests from the existing franchisee dealers for more dealerships corroborated the success of the Mahindra First Choice Wheels’ success model in India.

A minimum investment of Rs 50 lac to Rs 2 cr (depending upon the location) is required to be a franchisee and it can be lesser in case of D category town (a town with a population of 1,00,000).

“The rural and semi-urban market is the latest focus area of the company for expanding its foot print. The hinterland of India has an immense untapped potential for the used car business. We want to replicate our success of metros in the sub-urban India”, Palle informed.

He told that the 70% of the business comes from metros but the small towns are crucial as the growth rate is faster in the interiors due to rising aspirations of the Indians .

The average ticket size for a car purchase has decreased from 3.75 lac to 3.25 lac in the last two years as more and more first time buyers (even those in lower income brackets) are entering the used car segment.

The total market size for used car in India is approximately 3 million and 17% of it falls in organized market. Mahindra first Choice commands a 13% share in the organised sector pie.