IndianBlueBook (IBB), a pricing and analytics platform for new and pre-owned vehicles in India released their ‘India Pre-owned Car Market Report’, an in-depth study on the Indian pre-owned car market. The report attempts to ‘connect the dots’ in the growing pre-owned vehicle segment and provide insights into scale, stage and structure of the Indian pre-owned car industry. In its first edition, it also analyzes the Indian market relative to two other important markets – the United States and China. These relative country assessments, according to the company; is the first of their kind globally.
The report has leveraged India’s largest multibrand used car footprint “on the ground” via Mahindra First Choice Wheels franchise network and presence “in the cloud” with a suite of online properties including but not limited to Indian Blue Book and eDiig platforms.
Following are the key highlights of the report:
Scale: Market has reached critical mass, shows significant potential
- India is expected to be amongst the top 5 automotive markets in the world by 2020.
- At 3.3 million units, the pre-owned car market is growing at over 15% a year (organized segment is growing at over 25% a year)
- Just under half (45%) of all pre-owned cars sold are in Metros. Non-metros account for over half (55%) the pre-owned car volume sold and are growing faster than the metros.
- The North leads the pre-owned car market in India. At 36% it represents the largest geography, followed by the West (27%), South (26%) and East (11%).
- The North and West regions exhibit more organized channels than in the South. The East, while more organized, is a significantly smaller market and also highly concentrated in a few areas.
Structure: Largely unorganized retail & wholesale
- The market is supply-constrained, with inventory turns at dealers under 30 days vs. traditionally 60+ days in the U.S.
- Pre-owned car channels are highly fragmented with four primary market segments:
- Organized: 12% market share, Average Volume at 16 per month
- Semi-organized: 35% market share. Average Volume at 9 per month
- Consumer to Consumer: 34% market share
- Unorganized: 19% market share. Average Volume at <3 per month
- The unorganized sector is highly fragmented. It accounts for the bulk of the dealer population (58%) and only 19% of the total volume.
- There are no formal wholesale channels for dealers to procure pre-owned cars.
Stage: Developed in some ways, nascent in many
- India’s motorization rate lies at 22 cars/1000 people. US is over 800 cars/1000 people with a car parc that is 10X that of India.
- Like that of the U.S., the pre-owned car market in India is larger than its new car market (1.2X). China’s pre-owned car market, though larger in volume compared to that of India’s, is less evolved at 0.5X that of its new car market.
- Scale and price point are major drivers – dealer productivity and gross margins make India a relatively shallow market (dealer economics).
- Indian pre-owned car market is highly unorganized, when compared to the U.S., but more organized than that of China.
- There is significant headroom for pre-owned car financing, with growth expected in the coming years – Pre-owned car finance penetration in India is under 15% while that for new cars is approximately 65%.
- Finance penetration is significantly higher within the organized channel (40% across the metros and non-metros), while the semi-/unorganized channel is highly fragmented with higher channel costs for lenders.
- There are over 6,000 approved NBFCs in local markets that are funding pre-owned vehicles in India.
Customer profile and buying behavior:
- 50% of buyers are in the 25-34 years age segment.
- Average age of a pre-owned car at the time of sale is 4 years with average ticket size at INR 3-4 lakhs.
- For more than half (55%), a pre-owned car is the first in the family.
- Affordability, followed by value for money are primary reasons why customers consider pre-owned cars. The buyer looks for a trusted source and quality product to complete his pre-owned car transaction.
Speaking on the occasion, Nagendra Palle, Managing Director & CEO, Mahindra First Choice Wheels, said, “Over the last 24 months the pre-owned vehicle industry has been the subject of much attention from variety of industry stake holders such as investors, Automotive OEM’s, car dealers, financial institutions and consumers. However little is specifically understood about the industry due to severe paucity of data. This first of its kind report should be extremely useful to all stake holders in assessing the Indian pre- owned vehicle industry both domestically and in the global context.”