Finance Minister Nirmala Sitharaman will present the Union Budget 2023-24 in Parliament today. We chat with Niraj Singh, CEO and Founder of the pre-owned car platform Spinny to understand what the expectations are for the used car industry.
What are your expectations from the 2023-24 Union Budget with regard to used cars?
There has been a huge surge in used car sales over the past 4-5 years, owing to the increased preference for personal mobility and the stigma of owning a used car going away as the market is becoming more and more organized. The used car market has been traditionally dominated by the unorganized sector. However, over the past few years, the share of organized players has increased from 8% to 19%.
Considering this, a reduction in GST rates will encourage efforts to bring transparency to the segment dominated by variables. Similarly, the Government should evaluate incentives such as allowing people to claim depreciation on vehicles, liberalise tax benefits and enable lower interest rates on capital, as this would not only motivate people to buy and upgrade cars but also contribute to the growth of India’s GDP & further organize the pre-owned cars market. The new norms from the Ministry of Road Transport and Highways will encourage transparency, and address concerns regarding accountability and responsibility, creating a more level playing field between organized and unorganized entities. We are certain that the Government will introduce viable policy measures and significant initiatives in the upcoming budget that will help in propelling the industry.
How do you see the used car market growth in the next fiscal year?
The used car to new car ratio is currently at 1.4:1 and is likely to touch 2:1 in the next five years. The desire and need for personal mobility, rising disposable income, value for money, immediate doorstep delivery, availability of certified cars and ease in the transaction have been driving the market in India, which is thriving by the day. As per Mordor Intelligence report, The Indian used car market was valued at USD 32.14 billion, and it is expected to reach USD 74.70 billion, registering a CAGR of 15.1% during the forecast period.
With improvements & technological advancements offered by organized platforms in the used car segment, the market share is on an upwards trajectory. Furthermore, technology-driven transparency, convenience, and simplicity of transactions are also driving the growth of the used car market. The market is expected to burgeon further on the back of convenience, trust, and transparency offered by full-stack platforms.
Do you think adding some kind of incentives to the organized used car sector will benefit the end users? What can the government do to promote the adoption of used cars?
Currently, the used car market is largely dominated by unorganized players and incentives will help organized players to serve the demand volume better, and also provide better services aimed at augmenting customers’ experience. By regulating the used car market, incentivizing buyers and sellers, and improving authorization and certification procedures for vehicle transfers, the Government can contribute towards uplifting the used car market. To encourage the sale of used vehicles, the Government should consider extending tax concessions. Additionally, depreciation rebates to sellers will also increase sales.