Second To None

The used car market in India is disrupting the auto industry, already vrooming ahead of new car sales.

- Himanshu Kakkar

It’s raining cars in India. Does this sound crazy? Maybe a little, since managements at India’s top passenger car companies are spending sleepless nights over the dearth of customers. Even as they may have cause for concern, there is a sub-segment in passenger cars that is worry free and booming. While the new car market is struggling, the used car market registered a handsome 15% growth in FY19 (See: Fast track). So, let’s correct that opening statement. It’s raining ‘used’ cars in India.

And at four million units per year, it is already 1.2x larger than the new car market, which was around 3.3 million units in FY19. The sell-off-period for a car has fallen to five years today. That is a significant fall from eight to 10, about five years ago. According to Amit Kaushik, MD and country head at Urban Science, “Used car space has been growing significantly because of a reduced first term life cycle due to new offerings, body styles, new technology and brands.”

But, as is the case with several industries in the country, 70-80% of trades in this sector also remain unorganised. The organised sector includes original equipment manufacturers’ (OEM) pre-owned channels, namely Maruti’s True Value and Mahindra’s First Choice, which have been around for nearly two decades. Then there are new disruptive companies such as Cars24, OLX’s Cash My Car, CarDekho’s Gaadi Stores, Droom and Spinny. Most of them have emerged over the past three-four years.

The start-ups have become quickly popular, and they make money by charging up to 1.5% commission on each car sold through their platform. While, Cars24 started off as a pure play, a used car-buying company with brick and mortar stores, others such as OLX and CarDekho were operating as classifieds and listing platforms until recently. The promise of the market has pulled these players into setting up stores as well.