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Pre-owned car sellers expect a spike in demand in times of Covid-19

A study by second-hand car dealer Cars24 showed 22.5 per cent of the consumers, who were planning on buying a new car last year, would prefer used cars now due to limited budget

Topics
Used car market | Coronavirus | Cars24

Anchita Ghosh 

Auto companies are using all tricks in the book to lure this value conscious consumer.
Auto companies are using all tricks in the book to lure this value conscious consumer.

  • Mahindra First Choice Wheels Ltd, the largest used car network in the country, opened 34 new stores in 31 Tier-II and Tier-III cities on June 30, with 100 more new showrooms on the cards.
  • Just recently Maruti Suzuki started “direct buying” of old cars. Any seller can approach its pre-owned car firm True Value and sell any brand even if she doesn’t want to buy a new Maruti car, unlike the case earlier.
  • A study by second-hand car dealer showed 22.5 per cent of the consumers, who were planning on buying a new car last year, would prefer used cars now due to limited budget.

Get the drift? Between people’s need for the security of a personal vehicle and the insecurity over their jobs due to the Covid-induced economic stress, pre-owned cars have certainly become a point of interest. While it might take some time for the car to recover from the effects of the pandemic — in terms of shortage of workers and spare parts — various studies show the used car industry will recover much faster than the new car industry because consumers will change their ways of commuting and move from public transport and taxi services to their own vehicles. As the study notes, these factors will turn buyers towards used cars. Says Vinay Raghunath, partner and leader, automotive sector, EY India, “Consumers who are conscious of their budgets and are not able to afford a new vehicle, will look at the pre-owned car market seriously.”

At 4 million unit sales in FY19, the pre-owned car market is 1.2 times the size of the new car market, and it is anticipating a sharp spike in demand in the coming months. According to data from Indian Blue Book, a pre-owned vehicle valuation website, the organised pre-owned car market (Maruti True Value, Mahindra First Choice, Toyota Trust, among others) almost doubled its share in eight years from 10 per cent in FY11 to 18 per cent in FY19. A pre-owned car is often the first choice of two-wheeler owners who want to upgrade to a four-wheeler. IBB data also shows more than 85 per cent of two-wheeler customers buy a pre-owned car before buying a new car.

Pre-owned car sellers expect a spike in demand in times of Covid-19
Auto are using all tricks in the book to lure this value conscious consumer. Raghunath says a company’s ability to reach out to a wide set of consumers, position a wide pre-owned vehicle portfolio, demonstrate transparency and to leverage a phygital (physical-plus-digital) format will be critical to succeed in these fraught times.

Besides safety, customers have two major trust issues while buying a pre-owned car: First, quality and documentation, and second, price. Here the organised players have an upper-hand. Take Maruti’s True Value, which has a 376-checkpoint evaluation, refurbishment and certification processes. True Value, which posted average sales growth of 4 per cent till February, is observing 10-15 per cent increase in demand. “The organised pre-owned car market with better availability, reach, reliability, transparent pricing and finance availability is well-poised to attract customers,” says Shashank Srivastava, executive director, marketing and sales.

Players like Mahindra and Toyota are luring players with a guarantee. Ashutosh Pandey, CEO & MD of Mahindra First Choice Wheels Ltd (MFCWL), explains the buy-back guarantee offered by his firm. Say a customer buys a car for Rs 6 lakh. If she brings it back after doing, say, 18,000 km, MFCWL will buy it back for around Rs 2 lakh.

MFCWL is also gung-ho about expansion. And the biggest challenge in this is identifying the right partners.

Increasing the footprint is one thing; attracting footfalls is quite another, especially at a time when people are cautious about stepping out. So, most players are facilitating digital exploration and purchase.

CarDekho, for instance, has introduced TrustMark, a certification and warranty programme, under which the customer can select the cars for a test drive online, and thereafter, its representative will facilitate the purchase with easy finance options. It claims that post payment, a car is handed over to the customer in 60 minutes. It also offers free repair if anything happens within a week of the purchase, besides a six-month warranty on engine and transmission.

MFCWL says most of its marketing strategy is digital. “Imagine the whole customer journey as a funnel,” explains Pandey. "At the mouth, someone has to attract them (with a vehicle); then we identify the customers depending on their market profile with the help of social media sites like Facebook and Instagram. Once the customer is interested, two sets of people work -- at our call centres and dealers. One call centre executive is matched to three/four dealers to ensure the customer inspects the vehicle either at his home or store." In 30-35 per cent of cases, Pandey says, its vehicles go to the customers.

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First Published: Sun, July 05 2020. 18:18 IST
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