Maruti Suzuki Baleno, Honda City, Hyundai Creta SUV among the best-selling used cars in India

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The market for pre-owned cars is growing like never before. The rising cost of new cars and the shorter life cycle of existing vehicles have led to growth in the pre-owned car market. A new report released by OLX Autos in association with Crisil reveals that digital channels are playing a significant role in boosting the second hand car market. The market size is expected to double in the next five years.

Business Today spoke to Amit Kumar, CEO, OLX Autos, to understand what is driving the used car market and what lies ahead for the sector. Kumar claims the market will grow from 4.1 million units in FY22 to 8.2 million units in FY27, outpacing the new car market by 1.7X. Digital channels will see a 4X growth, from 3 per cent in FY22 to 12 per cent by FY27.

Read also: This is why India’s used-car market is expected to double in five years

What is driving the used car market?

Kumar claims that there are several factors that are attracting buyers towards the pre-owned car market. Some of them are listed below:

● Car penetration in India in FY22 is just 25 cars per 1,000 people compared to developed markets, for example, Brazil has 10 times more vehicles, 250 per 1,000 people, which is a big growth opportunity for India Indicates headroom on the scale.

● New car launch will accelerate replacement cycle for quality inventory

● Rapid innovation in the new car industry is leading to shorter life cycles for new cars and therefore boosting the supply of high quality used cars, increasing the acceptance of pre-owned cars

● Urbanisation, increase in disposable income and spending on personal mobility, apart from pandemic-induced consumer behavior (shift from shared mobility to personal/owned mobility) is also boosting sales in the pre-owned car market.

● Favorable regulatory push to promote expansion of organized pre-owned car segment.

Read also: Pre-Owned Luxury Car Market Growing At 15% CAGR Despite Price Hike

India’s love affair with the SUV segment continues

Unsurprisingly, the UV segment has witnessed an astonishing growth trajectory this year, claims Amit Kumar. The share of this segment grew from 17 per cent in FY2017 to 22 per cent in FY22, which is expected to increase to 32 per cent by FY27. This shift towards the UV segment in the pre-owned car market has also pushed up the average price of used cars and reduced the lifespan of cars available in this segment.

Most popular models in each segment

In terms of segments, small cars continue to grab a major chunk of the pre-owned car market.

Most popular small cars: Maruti Suzuki Baleno, Renault Kwid, and Hyundai Grand i10

The most popular sedans (over 4 meters): Honda City, Maruti Suzuki Ciaz and Hyundai Verna

Most popular UV: Hyundai Creta, Maruti Suzuki Brezza, and Maruti Suzuki Ertiga.

Most Popular Luxury Segment Cars: Mercedes Benz E-Class, BMW X1 and Audi A4

no price control

The rising demand will not give any respite to the buyers in the used car market as well. According to Kumar, the average selling price of pre-owned cars has increased by 5-10 per cent in the last 12-18 months. However, it got a boost due to global supply chain disruptions.

Kumar believes that the prices of pre-owned cars will continue to rise for some time before stabilising. Supply and demand for used cars will play a factor in pricing. Even though supply chain issues are easing, both the availability and demand for cars are on the rise as customers are changing their cars sooner.

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