The used car market is witnessing an uptake in sales with the semiconductor crisis impacting the supply of new cars.
Second-hand car sales are set to see a 15-20 per cent growth in sales compared with 2020, said Umesh Hora, CEO, used cars, CarDekho Group. Sales of used cars in 2020 had seen a similar 15-20 per cent growth over 2019, he added.
“There is a shortage in supply of new cars owing to the chip crisis. Production in the months of August and September are severely affected. However, even as supply is affected, there is a robust demand for cars and we are witnessing a sharp increase in enquiries for used cars,” said Hora.
“Demand for cars is super great, it is up by 10 per cent,” he added.
The OEM’s business-to-customer ventures such as Maruti’s TrueValue or Hyundai’s H Promise are witnessing an increase in enquiries as well.
“We have a number of walk-ins and phone-in enquiries. Usually people sold their cars to us and opted for new vehicles. There are first time car buyers upgrading from two-wheelers with a budget of Rs 1.5 lakh to Rs 2 lakh. Then there are buyers with a budget of Rs 5-9 lakh range. Here the demand is tremendous and is almost at pre-Covid levels,” said a Maruti TrueValue personnel.
About his customer profiles, Hora said: “Anyone with a budget of Rs 7-8 lakh are looking for a three-year-old or a two-year-old vehicle. People are opting for old cars in a higher segment. In such a scenario, the used car market will get a bigger boost.”
There is no supply constraint in the used car business, said Hora.
“People are exchanging their cars for an upgraded used car. The used cars are completely revamped with new parts and accessories,” added Hora.
Scrappage advantage
The central government’s recent scrappage policy is also supposed to give impetus to the used car business in the country where cars with a lower age are expected to drive the demand, industry experts said.
As cars’ age approaches scrappage age, its value will steeply fall. As a result demand will shift to younger cars with a consequent increase in prices.
The sweet spot for selling a majority of pre-owned cars is expected to shift to 3-5 years of manufacture rather than 7-8 years, experts said.
This will spur availability of used cars in the market and help keep their prices competitive, they said.
A recent report by consulting firm RedSeer said India’s used car market is expected to see significant growth in the coming years.
The car services and repair market in the country is likely to grow at an annual rate of 12 per cent to touch $25 billion by 2030 from $8 billion last year, it said. According to a study carried out by research firm Frost & Sullivan, used car sales is projected to outnumber new car volumes in a ratio of over 2:1 by FY2025.
