India’s pre-owned car industry is likely to cross 7 million units in next five years, according to the OLX-CRISIL Auto Study. The pre-owned market has been outpacing the new car market, and the industry is expected to clock a healthy growth rate of 15 per cent in FY22, it said. “While the prospects continue to be bright on the longer horizon, with a 12-14 per cent CAGR expected over the next few years, taking the size of the market to more than 7 million vehicles by FY26, from 3.8 million units in FY21. In contrast, the new car market is expected to grow at a tepid 10 per cent CAGR,” the report said.
Amit Kumar, CEO of OLX Autos calls it the sunrise sector. With many people preferring socially-distanced personal mobility, during and because of the pandemic, the pre-owned car market is expected to continue to be a sunrise sector. “The preference for personal mobility has propelled a huge swing in favour of used-car sales that are expected to reach a phenomenal 1.5x more than that of new car sales over the next five years. The digital switch has been highly transformative, bringing in its wake increased transparency, trust and a huge choice of new generation vehicles to the consumer,” Kumar said.
“In addition, the accelerating trend of digitalisation will lead to an increasing share of sales through digital classifieds, which will move to 25 per cent from 15 per cent currently.” The study also showed that the share of organised players in the pre-owned market, including digital platform sales, will also see a 10 per cent increase, from 20 per cent currently to 30 per cent in five years.
The pandemic, digitalisation, changing demographics and aspirations, first-time buyers, and availability of financing options are driving sustained growth in the pre-owned car segment. One of the major trends, according to the study, is the digitisation of the industry. “Digital platforms are gaining traction due to their wide reach, accessibility and ability to provide a variety of options. The share of organised players, including digital platforms, to total industry sales is expected to grow to 30 per cent by FY26, from around 20 per cent in FY21. Additionally, the share of vehicle sales through the digital classifieds segment is expected to increase from 15 per cent in FY21 to 25 per cent by FY26,” the report said.
Apart from the digital push, the market has received a boost from first-time buyers who account for nearly half of all pre-owned cars sold in India. The report said that the share of first-time buyers expanded by 8-10 per cent during FY21 in the backdrop of the pandemic, primarily due to restricted availability of public transport, and increased need for personal mobility. “Increasing urbanisation and nuclearisation are expected to provide further impetus to the need for personal mobility, thereby accelerating the demand for pre-owned cars,” it said.
Another upcoming trend is that the share of EVs in new car sales is expected to reach 20 per cent by FY31, at which point in time, the share of EVs in pre-owned car sales is expected to be around 5 per cent. It also outlined the impact of the pandemic on market and consumer behaviour. “With the emergence of OLA & Uber, many customers had deferred purchasing personal vehicles, especially in metro cities. However, the pandemic brought the interest back on the need for owning personal vehicles, and this trend is unlikely to abate in the near term,” the study said.
Another emerging trend in mobility is the rise in preference for and the share of UVs in the pre-owned car market. In line with their expanding share in the new car market, share of UVs is increasing in the pre-owned car space, up from 18 per cent in FY18 to 20 per cent in FY21. “Due to the intermittent launches, UVs are also seeing faster replacement cycles. Intermittent model launches and feature-rich competitively priced vehicles will aid the shift towards UVs in the pre-owned car space, whose share will cross 1/4th of the total market by FY26. The share of UVs is the highest among all regions in the East, at 35 per cent of the total market. In terms of regional mix, South lost ground to North vis-a-vis share of total sales of pre-owned cars. The share of the South dropped to 26 per cent from 28 per cent, while that of the North increased to 38 per cent from 35 per cent,” Kumar said.
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