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BW Businessworld

Second-Time Lucky

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The pre-owned car market seems to be the best segment to be in. And Maruti Suzuki and Hyundai are reaping rewards for being in the business for long. Together, these automakers have sold more than 120,000 pre-owned cars last year and are planning to double this to 250,000 cars by 2013.

Maruti Suzuki and Hyundai sold about 1.3 million new cars last fiscal (of the total 2.27 million), and they expect much of the fleet to be back in the pre-owned market in three to four years. "Duration of car ownership is coming down from seven to four years in India," says Len Curran, vice-president of sales and marketing at Renault India. Renault has a large pre-owned car business in Europe and is now "studying" the India market.

Maruti's pre-owned car sale arm True Value has about 360 outlets in 210 cities, while Hyundai has around 270 dealerships. Hyundai alone sold 54,000 cars last year. Says Arvind Saxena, director of marketing and sales for Hyundai Motors India: "We can take this number higher as dealers make better margins from selling used cars." The dealer margins for pre-owned cars are around 4 per cent, against about 2 per cent for new car sales. And that's a lucrative incentive, which has been propelling used-car sales in India, where the ratio between new cars and used cars stands at a trifling 1:1, while the number for the US is 1:4. Saxena says the company plans to sell over 100,000 units in a couple of years. Yes, he has all reasons to be optimistic.

(This story was published in Businessworld Issue Dated 01-08-2011)