The month of April has been a bloodbath for auto companies, with the big players reporting anywhere between a 9 and 19 percent fall in domestic sales across categories.
The good news? The used car market seems to be immune to the headwinds, at least for now. According to an IndianBlueBook report published in partnership with Mahindra First Choice, the used car market now stands at 4 million units, which is 1.25 times bigger than the new car market – and is expected to touch between 6.7 and 7.2 million units by FY22.
Ashutosh Pandey, managing director and chief executive officer of Mahindra First Choice Wheels said that the used car market grew at 12 percent in FY19 while the new car market only grew by 3.5 percent.
He was quick to add that the slowdown in the new car market hasn’t led to a surge in used car purchases, saying that the uptick was led by two-wheeler owners looking to upgrade.
Further, Pandey said that a continued slowdown in the auto market could have a negative impact on the used car space as well, if unchecked for another 12-18 months.
The used car market in India has been dominated by unorganised and semi-organised players who currently account for 50 percent of the total market size, with customer to customer (C2C) transactions accounting for an additional 32 percent of transactions in FY19.
However, organised players like Mahindra First Choice are fast expanding, now sitting on an 18 percent market share, nearly double from the FY11 number of 10 percent. Pandey expects the organised channel to grow to 30 percent of the market over the next three years.
Mahindra First Choice is betting big on this hypothesis and is set to add 600 stores to its retail arm by the end of this financial year, the fastest ever yearly growth.
The X factor could be an increase in formalised credit for second-hand car buyers – financial penetration currently stands at only 15 percent for used cars against over 75 percent for new ones.
First Published: IST