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Used Car Business Seeing Green Shoots Post Covid-induced Lockdown

The pre-owned car market is expected to show a growth of 5-7% after factoring in the impact of business interruption due to lockdown during most of Q1.

Photo Credit : autoblogon.com

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It is a known fact that the highly contagious coronavirus has resulted in a massive shift in consumer mindset as public transport or ridesharing are no longer considered a lucrative proposition in the short to medium term. Recent studies suggest that pre-owned car market, which includes organised segment, is expected to show a growth of 5-7% after factoring in the impact of business interruption due to lockdown during most of Q1.

As an increasing number of people are inclined towards ownership model, a number of carmaking firms and used car platforms are witnessing a surge in the number of queries and sales in the pre-owned vehicle segment.  However, during economic distress, customers are expected to downgrade their demand due to declining affordability and enhanced focus on functionality.

At present, the used car market in India is highly unorganized, with only a few organized players available in the market contributing roughly 18% of total pre-owned cars sold per annum. The used car market size is around 1.5-1.7X of the new car market. As per estimates, over 4.2 million pre-owned cars were sold in FY 20 and approximately 3.5-3.8 million vehicles (or even more) are expected to be sold during this financial year. In the medium term, the used car business is expected to remain strong and increase to 1.9 cars per new car in 2-3 years from 1.5x currently.

Mahindra First Choice Wheels Limited (MFCWL), India’s foremost organized multi-brand used car player, sold about 2 lakh used vehicles during last financial year and is confident of beating those numbers during the current FY despite the lockdown. However, the company has maintained that this year’s total numbers would hinge on the macro scenarios such as scale of lockdown, moratorium and availability of financing for used vehicle transactions.

“There has been a significant growth in the people enquiring for used cars post lockdown. The enquiries via our websites (carandbike.com and mahindrafirstchoice.com) and call centre have increased 2.5X in the post lockdown period. The retail sales numbers are at 70% of our regular business in spite of 25-30% of our 1,000+ stores constantly being affected due to the start-stop lockdown. Smaller towns continue to drive queries for the company as nearly 65% of our July volume came from Tier-II, Tier-III and Tier-IV markets,” avers Ashutosh Pandey MD & CEO, MFCWL.

Droom, which is an online marketplace for used cars, has confirmed that it has witnessed 175% growth in traffic and 250% jump in the leads on its platform, we.  Furthermore, the company has got its Inventory listed worth US$ 6 Billion from 2,659 cities on its platform.

“We plan to capitalize on the rising demand with unparalleled hygiene consciousness. Our new ‘c-commerce’ model offers an end-to-end contactless experience including online vehicle research, door-step test drive, door-step delivery, online documentation, and digital payments. On the back of careful consideration of consumer needs, Droom, which owned around 80% of the market share in online automobile sales before the COVID-19, is well-equipped to retain its majority market share even with larger online sales opportunities, “Sandeep Aggarwal, Founder, Droom.

Carmakers too keen to jump on the bandwagon……

Most of the carmakers have confirmed that physical distancing norms and the increased concerns regarding safety and hygiene are likely to give an impetus to the used car business.

Maruti Suzuki, which is running over 550 True value outlets, spread across 275 towns and cities in the country, stated that it is pretty confident that the current situation and sentiments will have a positive rub off on the used car market as the price of the new vehicle would be higher.

“Further to the Covid-19 outbreak, the new normal will be defined not just by the used-car market but across business verticals in the world. Digital car buying, contactless experience and servicing will see a major growth and we expect a further increase in the demand for doorstep, pickup & drop services. Digitalisation will be the way forward post the pandemic,” revealed Shashank Srivastava, Executive Director, Marketing and Sales, Maruti Suzuki India Limited.

Likewise, Hyundai India maintains that the contribution through exchange of Pre-Owned cars in H1’20, which is approximately 20 % of new car Sales, will go up further.

“We have witnessed an increase in the demand for second hand vehicles due to mandatory social distancing norms keeping in mind health and hygiene factors. But at the same time, people are deferring the decision of selling their cars due to economic uncertainty caused by the current situation,” Tarun Garg, Director – Sales, Marketing & Service, Hyundai Motor India Ltd.

Honda Cars India Limited (HCIL), which has been selling an average of over 40,000 pre-owned cars annually through Honda Auto Terrace in the last few years (comprising of both Honda and non-Honda cars), believes that the demand for pre-owned cars sold through organised sector in recent years has been on the rise as it offers both affordability and peace of mind for its customers.

“Customers are increasingly using digital platforms to consuming information, making online enquiries or bookings and assessing products and offers, “affirms Rajesh Goel, Sr. Vice President and Director, Marketing and Sales, HCIL.


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