Mumbai: The demonetisation coupled with goods and services tax (GST) and Bharat Stage (BS)-IV norms seem to have made a dent in the domestic pre-owned car market with the segment growing six per cent lesser in the previous fiscal against the projected growth of 15%, as per an industry report.
However, at the same time, the Centre’s decision in November last year to ban Rs500 and Rs1,000 notes, which were subsequently replaced with new Rs500 and Rs2,000 notes, and greater access to credit have allowed for increased finance penetration in the organised segment, IndianBlueBook, a vehicle pricing research platform, said in a report released on Wednesday.
The 3.6 million pre-owned car market grew at nine per cent as the demonetisation reduced market size by two lakh units or an estimated six per cent of the overall used car sales market, it said. Over the past year, the market has been hit by significant “jolts" in the form of three major market reforms—demonetisation, BS-III/BS-IV and GST, it said.
“While these reforms have no doubt disrupted the status quo, they have necessitated that all stakeholders change with the times and become more organised," Mahindra First Choice Wheels Ltd’s managing director and chief executive officer Nagendra Palle said at the launch of the second edition of ‘India Pre-Owned Car Market Report’ 2017.
“Notwithstanding the short term hiccups, we strongly believe these market reforms are good for the organised industry in the long term," he said. Mahindra First Choice Wheels is Mahindra group’s pre-owned vehicle selling arm.
According to the report, the current GST regime imposes a significantly higher burden on the dealer—on a pan-India basis—roughly twice the rate that was otherwise being incurred. As per the report, in 70% of states, dealers will have to pay higher taxes post-GST, compared to the old tax regime but the current GST structure is expected to give a fillip to C2C transactions.
The highly fragmented pre-owned car market is divided into four categories—the organised, semi-organised, unorganised and consumer-to-consumer market. While the organised category accounts for 15% of the total market pie, the semi-organised market accounts for 6% of all used car sales in the country. The unorganised market commands a 17% share in the over all sales and the consumer to consumer market 32% of the total pie.
The report also noted that the pre-owned car market continues to organise rapidly with both organised and semi- organised segments growing by 36% and 12% respectively by volume, while C2C and unorganised segments have remained flat.