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

The pre-owned car market is growing at a pace never seen before. The increasing costs of new cars and shorter life cycles of existing vehicles have led to a boost in the pre-owned car market. A new report released by OLX Autos, in association with CRISIL, reveals that digital channels are also playing a crucial role in giving a push to the second-hand car market. The market is likely to double its size in the next five years.

Business Today spoke with Amit Kumar, OLX Autos CEO, to understand what’s driving the used car market and what lies ahead for the sector. Kumar claims that the market is going to 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 growth from 3 per cent in FY22 up to 12 per cent by FY27, an increase of 4X.

Also read: Here’s why India’s used-car market is touted to double in five years

What is propelling the used cars market?

Kumar claims that there are multiple factors at play that are driving buyers toward the pre-owned car market. Some of them are listed below:

● Car penetration in India is just 25 cars per 1,000 people in FY22 compared to developed markets, e.g., Brazil has 10 times more vehicles, at 250 per 1,000 people, indicating a massive headroom for growth for India. 

● New car launches will accelerate replacement cycles for quality inventory

● Rapid innovation in the new car industry is leading to shorter life cycles for new cars and therefore infusing the supply of high-quality used cars, which is driving the acceptability of pre-owned cars

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

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

Also read: Pre-owned luxury car market growing at 15% CAGR despite increase in prices

India’s love affair with the SUV segment continues

Unsurprisingly, the UV segment has seen a surprising growth trajectory this year, claims Amit Kumar. The segment increased its share from 17 per cent in FY17 to 22 per cent in FY22 which is estimated to grow to 32 per cent by FY27. This shift towards the UV segment in the pre-owned car market has also pushed the average price of used cars higher and has also driven down the age 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

Most popular sedans (beyond 4m): Honda City, Maruti Suzuki Ciaz and Hyundai Verna

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

Most popular luxury segment cars: Mercedes Benz E- Class, BMW X1 and Audi A4

No taming the prices

The growing demand will offer no respite to buyers, even in the used car market. According to Kumar, there has been a 5-10 per cent increase in the average selling price of pre-owned cars in the last 12 -18 months. However, this was fueled due to global supply chain disruptions.

Kumar believes that the price of pre-owned cars will continue to rise for a while before stabilizing. The supply and demand for used cars will play a factor in pricing. Even as supply chain issues are easing, there’s a steady growth in both the availability and demand for cars as customers are replacing their cars sooner.