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Used car trade could rev up auto revival as consumer turns budget-conscious

Bookings, sales perk up for hatchbacks, cars between Rs 4 lakh and Rs 6 lakh

Topics
Used car market | used car loans | used cars

Pavan Lall  |  Mumbai 

automobile, auto sector, traffic, cars, vehicle
Commuters stuck in traffic jam on their way to Mumbai after lockdown in the wake of coronavirus pandemic. Photo: PTI

Mahindra First Choice Wheels (MFCW), the country’s largest multibrand used car platform, has seen sales decrease by around 50 per cent over the last two months. However, the good news is that bookings are still happening with orders being executed, post the coronavirus-led lockdown.

Ashutosh Pandey, chief executive officer (CEO) at MFCW, says that the decline in shared taxi operations has led to growing inquiries for smaller and on its platform.

It’s not just window-shopping. MFCW has seen 1,500 bookings being executed in the last two months for cars that would likely be used for short-haul drives and trips by family members during the lockdown.

Consumers are looking to opt for personal vehicles over public transport and there is shift from two-wheelers to four-wheelers. They are revising their budget downwards, given the economic malaise spreading across the country, said Pandey. Some top brands that consumers have on their list include Maruti Suzuki, Honda and Hyundai.

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Other sales platforms are also seeing a similar revival of interest, albeit with smaller bookings and sales.

Banwari Lal, CEO at Carwale, a classifieds marketplace for cars, says the volume of searches is down by around 40 per cent but has slowly picked up again in the last 10 days.

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“People are sticking to the same car. They are not downsizing their budgets and the quality of demand has not come down either,” he said. “The ticket size for our average enquiry is around Rs 3.75 lakh.”

Sandeep Aggarwal, CEO of Droom, an online market place for vehicles, says while February was one of its best months with transactions valued at over Rs 600 crore, the lockdown weeks that followed saw zero business.

Searches crashed from 14,000 enquires per day to 4,000 but that has picked up again with about 7,000 enquires in recent times. “We saw a glimmer of activity starting in the last week with around 100 cars being sold,” he said.

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“BS-VI cars are much more expensive than the BS-IV versions, and so, some buyers are also going for versions that are a couple years old,” he adds.

Arshdeep Singh, director of marketing at Spinny, a used car platform, is also seeing similar traction but at a smaller scale. Spinny has sold around 6,000 cars since starting its business. Singh says it’s the price point between Rs 4 lakh and Rs 6 lakh that is getting the most interest.” Spinny sold 60 cars in the last two weeks in Bengaluru and Gurgaon to younger buyers, mostly under the age of 40.

Earlier, MFCW would see sales of anywhere between 12,000 and 13,000 vehicles a month. This started to slide with the general auto slowdown even before the lockdown began, says Pandey.

“The sales and bookings we see are also being driven by car exchanges. That means the company is also buying a lot of vehicles.” There is also a greater supply of high range older vehicles that customers are selling when they want to buy other cars.

MFCW has revenue of about Rs 373 crore a year and its other business lines include an auto portal that serves as an advisory as well as a fleet business for b2b clients. The portal sells repossessed cars that are acquired by corporate fleet and is growing fast.

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“The repossessed vehicles that come from non-banking financial companies (NBFCs), banks and entities that have seen purchase defaults, are part of the business that has been growing 100 per cent year on year in the recent past,” said Pandey. “We expect that to continue.”

A car sees 10 per cent value erosion the moment it is taken out of a dealership. And, in the first year, there is between 15 per cent and 20 per cent value erosion.

“In three or four years, you can get a car for half the price,” said Aggarwal. “I even think may lead the way forward for recovery of the sector in India,” he adds.

What do clients look for most in the “People value reliability more than anything else in this business,” says Pandey.

First Published: Fri, May 22 2020. 15:22 IST