iconimg Saturday, September 05, 2015

Sumant Banerji, Hindustan Times
New Delhi, July 31, 2013
Last year, for the first time, Indians bought as many new cars as pre-owned ones. During 2012-13, Indians bought 2.69 million used cars, an increase of 22.3% over the previous year. Compared to this, 2.68 million new cars were sold, a meagre 2.2% more than the previous year.
The shift in preference is attributed to two factors - the lower cost of used cars, and the proliferation of organised chains selling pre-owned cars, that provide warranty (and reliability). While new car sales continue to stagnate, the sales graph for used vehicles is moving upwards.



These organised chains, mostly subsidiaries or divisions of existing car makers, now account for 15% of the market for second hand cars. However, companies such as CarNation, promoted by former Maruti chief Jagdish Khattar are not affiliated to any auto company.

Maruti True Value, the early mover in this business and the biggest player, sold 231,000 units in 2012-13, and grew 8% year-on-year in the first three months of 2013-14.

Notably, the company’s new car sales during the same period saw a 7% decline.

Similarly, Mahindra First Choice, the pre-owned business arm of utility vehicle major Mahindra & Mahindra, hopes to hit sales of 60,000 units and a growth of 35-40% over last fiscal, when it sold 46,000 units. For 2016-17, it is targeting sales of over 100,000 units.

“The volatility in the pre-owned car business is much less as compared with new car sales,” said Rajeev Dubey, president , corporate services, Mahindra and Mahindra  “Whenever new car sales go up we benefit. But whenever they go down, we do not go down as badly. This year, due to our new centres we will show robust grow but the overall pre-owned car industry may not grow as much as last year.”

Car makers are facing a problem with high inventories of new cars.

The reverse is true for pre-owned ones: there is an actual supply crunch.

With customers deferring new car purchases and clinging on to old vehicles, fewer units are entering the market, even while there is no shortage of buyers.

“There is some growth in supply from the banks as the number of re-possessed cars has gone up,” Dubey said.

“The number of individual users putting up their cars for sale has (on the other hand) gone down,” Dubey added.