Shriram Automall sees Uber, Ola driving growth of its used car business
Mumbai: The boom in India’s cab app market (or cab aggregation services) is one driver of growth for his company’s used-car selling platform, according to a senior executive at Shriram Automall India Ltd (SAMIL), a subsidiary of Shriram Transport Finance Co. Ltd.
SAMIL offers a bidding platform for trading of used vehicles and equipment, and expects brisk growth in the used car business, led by increasing demand from the commercial car market which includes cab aggregators, said Sameer Malhotra, the company’s managing director and chief executive officer.
SAMIL, which got into the used car business last year, sees 60% of demand coming from the commercial segment and the remaining from individual buyers.
The company sold a total of 100,000 used vehicles, including per-owned trucks, tractors and motorcycles, last year, of which used cars accounted for 15%. This year, it expects to sell around 145,000 vehicles and the share of cars is expected to be 20%.
The company plans to expand its network and increase the number of auto malls from the current 52 to 60 by the end of fiscal 2015-16.
There’s no denying the existence of a market.
“For every new car, a little more than one used car is sold,” says Kumar Kandaswami, senior director, Deloitte Touche Tohmastu India. Given the pace at which this market is growing, over the next three-five years, the ratio of sales could well shift to three used cars for every one new car sold, he said.
Car sales in India grew 7% in fiscal 2014-15. Fuelled by new models, among other factors, it has been advancing month on month for nine months in a row.
But the used car space is a competitive one.
The entry of auto firms and dedicated online platforms in the used car space has organized a segment that till five years ago was the preserve of a number of unorganized stand-alone dealers. The newer entrants claim to bring credibility and transparency to the whole process of buying and selling used cars.
SAMIL’s focus on commercial vehicles, said Malhotra, will help the company cut through the clutter in the used car space. It came as a logical extension of company’s core business—truck finance.
SAMIL’s parent company Shriram Transport is India’s largest financier for used trucks and other commercial vehicles.
“The entry into this was driven by our existing customers,” said Malhotra.
Unlike some competitors, SAMIL does not offer certification or any kind of assurance to its buyers, a factor that might go against the firm.
“I am not sure, they would even be able to make a mark in such a crowded space with such a short-sighted approach,” said Kaushik Madhavan, head of auto and transport at consulting firm Frost and Sullivan.
Whether it’s an individual buyer or a buyer from the commercial segment, a customer will require some kind of assurance, said Madhavan.
Malhotra of SAMIL justifies this strategy.
“We are not a manufacturer. Our primary role is to offer both the buyers and sellers a common platform to meet,” he said.
SAMIL will largely focus on smaller towns and cities where used vehicles are in great demand and where Shriram Transport Finance has been traditionally strong.