Demand for pre-owned cars outstrips supply

Vijay C Roy

Tribune News Service

Chandigarh, January 7

Ideally, the pre-owned car market is largely driven by supply and not demand. However, in North India, especially Punjab, Haryana and Delhi, the demand for pre-owned premium cars outstrips supply, as people have a passion for big and luxury cars and see value for money in the deal. As compared to North, the western and southern regions prefer compact cars.

Also, in North India, people change their cars more often as compared to other regions. The average ownership period of a car has come down to four years as compared to 8-10 years a decade ago. In southern region, the average ownership period is around six years.

Banking on the demand, the organised players are expanding their footprint in the northern region to have a larger share of the market, which is still dominated by the unorganised sector in small cities. In metros, however, the unorganised sector has a market share of 50% while in smaller cities they rule the market with 80% share. Major players in the organised sector are Mahindra First Choice Wheels, Maruti and Hyundai.

“There is a demand for premium vehicles in North as compared to compact ones in the western and southern region. However, the demand for pre-owned cars is more than supply. We want to capture a significant market share in the growing used-vehicle segment by expanding our presence,” said Ashutosh Pandey, CEO & MD, Mahindra First Choice Wheels Ltd.

To cash in on the growing demand for premium cars, Mercedes-Benz has also launched its e-commerce platform to sell pre-owned cars. Pre-owned luxury cars offer better value to customers than new ones.

The northern region, comprising Punjab, Chandigarh, Haryana, Himachal Pradesh, J&K, including Delhi, Uttar Pradesh, Rajasthan, contributes 25-30% to the total car sales in the country.

The advantage of price factor gives many first-time buyers an option to own a premium pre-owned car. This is evident from the fact that though new car sales were affected by the slowdown, used-car market clocked 12% increase in sales in 2018 at 4.2 million units and is set to record 15% increase in sales in 2020.

Car dealers are of the view that the price differential between a BS-IV and BS-VI vehicle will give a fillip to the used-car market. It will ensure that the industry continues to register a double-digit growth in sales in 2020.

It is perceived that the impact would be across the segments, including hatchbacks, but it will be more pronounced in premium cars and SUVs.

“The older models will be sold in small cities, which are served by unorganised players,” said Rupesh Gilhotra, a Chandigarh-based dealer.

Pre-owned car market

• Premium cars/SUVs: Preferred in North India
• Average ownership: Four years
• Owner’s profile: First-time buyers

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