Delhi used car dealers see diesel car shortage as demand surges

With the Supreme Court barring new diesel cars with over 2,000cc engines till 31 March, buyers are flocking to used models and sellers are holding on to them

Shally Seth Mohile
Updated25 Dec 2015
Photo: Hemant Mishra/Mint<br />
Photo: Hemant Mishra/Mint

At a Delhi-based franchise of Mahindra FirstChoice—the multi-brand used car business of Mahindra and Mahindra Ltd—Saurabh Batra is worried.

The franchise owner, who would have been otherwise elated at the flood of inquiries and demand for second-hand diesel vehicles, frets that he won’t be able to replenish his stock.

With the Supreme Court barring registration of private diesel vehicles with two-litre-plus engines till 31 March, those who were looking to buy such cars are now flocking to used models which are already registered, while those who would have sold such cars to him are holding on to them.

“If the inquiry and demand for used vehicles, particularly sport utility vehicles (SUVs), continue at this pace, we will soon run out of the inventory we have,” said Batra, adding that the Supreme Court order has sparked confusion in the minds of the buyers. Inquiries for such cars have risen by almost a third after the ban, Batra said.

It was expected that sales of auto makers such as Mahindra and Mahindra, Mercedes Benz India Pvt. Ltd and Toyota Kirloskar Motor Pvt. Ltd would be hit after the Supreme Court’s 17 December order, but what was not foreseen was the rush for used cars and potential sellers holding on to their cars.

In the year ended 31 March, auto makers sold 329,576 diesel passenger vehicles with engine capacity of 2,000cc or more, according to the Society of Indian Automobile Manufacturers (Siam), a lobby group. Manufacturers are now waiting for 5 January, when the court might review its order.

Jatin Ahuja, president at Delhi-based Big Boy Toyz (BBT), which sells used Lamborghinis, Bentleys and Ferraris, said inquiries have gone up by 20% since the court order. However, unlike Batra, Ahuja is not worried about replenishing the stock.

“It’s only a matter of time before buyers readjust their demand. If diesel is not available, they would go for petrol,” he said. Besides, many of his sellers and buyers are from outside the national capital region; hence, the ban doesn’t affect Ahuja as much as others. Also, diesel cars account for little more than a third of the second-hand cars BBT sells.

“Replenishing the stock will indeed be a challenge for used car dealers for the short term till there’s more clarity on the road ahead,” said Kumar Kandaswami, senior director, Deloitte Touche Tohmatsu India Pvt. Ltd, a consultancy firm.

One can always replenish stock by getting cars from other cities, but dealers will have to incur additional costs on re-registration of vehicles and logistics. The ratio of new to used cars sold in India is 1:1.1, he said.

The used car market has also come under pressure lately, following the launch of several compact car models at competitive prices.

To be sure, some also believe that if the ban does get extended beyond 31 March, the proliferation of used diesel cars on the roads from around the states in Delhi will go up in a big way, defeating the very purpose of the ban.

“Sooner or later, the court will have to take into cognizance the existing pool of diesel cars on road,” said Rajeev Singh, head of automotive practice at consulting firm KPMG. These are a lot more polluting than new models, which use cleaner technology, he added.

A survey conducted by online used car market Cardekho.com also points towards a surge in demand for second-hand diesel vehicles. The survey revealed that even as the ban created a dent in demand for top automobile brands in the affected segments such as big SUVs, used car leads for these models increased by 17%, it said on 23 December.

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