India’s used car market likely to more than double to $70.48 billion by 2027-28

Indian used car industry was valued at $31.33 billion in 2022-23: Report

Indian used cars industry Representative Image

Passenger vehicle sales in India have seen strong growth over the last year, aided by a slew of new launches. The used car market is also seeing rapid traction as new car buyers enter the market, the organised market is expanding and not too old good quality cars from major car makers are available at a relatively good price.

According to the latest IndianBlueBook used car market report, published by Car & Bike and Das Welt Auto, the Indian used car industry was valued at $31.33 billion in 2022-23. It is expected to more than double to $70.48 billion by 2027-28.

The passenger vehicle market in India is significantly under-penetrated, compared with global markets. For instance, in India, there are 15 cars per 1,000 people, compared with 150 in China and around 350-450 in many developed markets. That will be a key driver for the used car market in India.

Also, what was largely an unorganised market, has seen organised players like Mahindra First Choice, CarTrade, Maruti Suzuki True Value, and Das Welt Auto (Volkswagen's used car business) grow rapidly. These companies offer better quality, better checks and balances and service and this has also helped in driving the confidence and demand for used cars.

"There is a very strong movement towards the organisation of this space. In 2010, barely 5-7 per cent of the market was organised. Today, roughly about 25-27 per cent of the market is organised. A combination of value, which is always been the unique selling point of used vehicles, combined with the fact that now the vehicle has started getting accepted as a mainstream product and not just a compromise is something that is going to define the used car market for the next four-five years," said Ashutosh Pandey, CEO and MD of Mahindra First Choice.

Leasing of cars has not been big in India. But, as that grows, industry executives see a lot younger vehicles coming into the used car market as typically people lease cars for around 3-4 years before changing to another car. This will be another big driver in the car market.

"For the industry, leasing is 3-5 per cent of your new car sales right now. It is not a make-or-break kind of business for any OEM (original equipment manufacturer). But, the growth percentage in leasing has been very high. It's almost doubled or tripled in three years. That is why it makes an interesting proposition for all of us and a space none of the OEMs can neglect," said Ashish Gupta, brand director, Volkswagen Passenger Cars India.

According to the report, a majority of buyers (63 per cent) are highly budget-conscious. The service history of the vehicle is also a key consideration. Also, a noticeable shift in customer preferences while selecting a pre-owned car is a priority for safety features, which just has been the case in the new car market. 

This has driven demand for highly safety-rated cars in the used car market. It has also positively impacted the residual value of such vehicles in the used car market.

"Currently in the used car market, the demand is more than the supply. More customers are looking for young used cars, cars used for 3-5 years, whereas the availability of cars is five years and beyond. That is driving the demand or selling prices in the market," said Gupta.

According to Gupta, there is at least a 15 per cent gap in demand and supply, especially for 3 to 5-year-old cars. With demand outstripping supply, prices of used cars have also gone up 8-10 per cent every year, which is faster than in the new car market, he added.

Last year, Volkswagen's Das Welt Auto sold close to 30,000 used cars, a growth of around 12 per cent. It operates through 137 facilities across the country. Gupta expects the company's used car business to grow around 10 per cent in the current financial year.

Das Welt Auto has been in India since 2012. Through this year, the company will rebrand the business to Volkswagen Certified Pre-Owned, with the aim to "communicate similar brand values" across the new as well as used car business, Gupta said. 

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