Home / Auto News / Demand for UVs gone up drastically among pre-owned car buyers: CEO OLX Autos
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Used car market continues to grow in India on Diwali, and with the pre and post Covid situations it has expanded the reach beyond imagination. The urge for personal mobility due to the on-going pandemic and global semiconductor chip shortage resulting in longer waiting periods are also acting as strong catalyst for the pre-owned car market in India. Amit Kumar, CEO, OLX Autos India, explained the pre-owned car market and its dynamics with us.

Is the pre-owned car market outpacing the new car market?

The pre-owned car industry prospects are bright on a longer horizon and a 12-14 per cent CAGR growth is expected of the industry to reach 7.1-7.3 million vehicle levels by FY26 from 3.8 million units in FY21. During FY18-21, while new car industry contracted 6%, pre-owned car industry rose at 4 per cent CAGR in unit terms. Pre-owned car industry clocked 1.4x volumes of new car industry in FY21. Unit price of pre-owned cars has gone up by 5 per cent (from 3.32 lakh to 3.49 lakh).

What are the key growth drivers in this segment?

First time buyers account for 40-45 per cent pre-owned car sold in India. Share of first time buyers expanded by 8-10 per cent during FY21 amidst the pandemic with increased need for personal mobility amidst Covid concerns coupled with restricted availability of the public transport.

Given the preference of relatively cheaper vehicles in the less than 3 lakh bracket of the first time buyer customer segment, there was a sharp uptick in the traction for these vehicles during FY21 

Digital format pushing growth

The digital mediums provide an additional platform for the dealers to showcase and sell their vehicles. Most customers search on these platforms before visiting the actual dealership. Pandemic has provided an additional kicker to this medium amidst the restricted customer movement during fiscal 2021 and 2022. Share of organized players (including digital platform sales) to the industry sales is expected to increase from 20-22 per cent levels in FY21 to nearly 30 per cent by FY26. Additionally the share of vehicle sales through digital classified segment is expected to increase from 15 per cent in FY21 to 25 per cent by FY26. Rising internet and smartphone penetration is aiding the use of digital formats.

What has been the impact of pandemic on the pre-owned car market?

Vehicle supply got impacted across regions with increased demand for personal mobility and in turn due to the increased reluctance of the customers to sell their old vehicles. Rise in waiting periods in the new car segment impacted the ratio of vehicles exchanged with the new car purchase, worsening the supply situation in pre-owned vehicle market. During the first wave of the pandemic, supply crunch and increased demand impacted the stock levels across regions mainly in South and West where inventory levels came down to 30-35 days. 

After the drop in stock levels in CY2020, supply levels are slowly normalizing in CY2021 with improved mobility, lesser restrictions as well as lower reluctance to sell vehicles; some improvement in new car vehicle supply is providing an added push. Unlike other regions, North region was relatively shielded from the supply crunch and could maintain near steady inventory levels throughout the pandemic

Increased demand post unlock

Compared to pre Covid levels, demand shot up 20-30 per cent post unlock in CY 2020Demand improvement was more pronounced in South followed by West, while demand growth was relatively lower in East even post lockdownDemand is gradually normalising to pre Covid levels across regions in CY2021. However, the second wave hit the Southern region especially Kerala hard and the prolonged restrictions have impacted demand in CY2021, and the sales have dropped below pre Covid levels. There is a sudden increased traction for cheaper fuel efficient cars due to rising fuel prices.

What are the key trends prevailing in this segment?

In line with the expanding share in the new car market, share of UVs is increasing in the pre-owned car space from 18 per cent in FY 18 to 20 per cent in FY 21. Share expansion is expected to continue going forward as the new UVs come into the pre-owned market. Intermittent model launches, feature rich competitively priced vehicles to aid the shifting preference towards UVs.

Given the intermittent launches, UVs are also seeing faster replacement cycles. It is expected to grab more than 1/4thof the market by FY26. UV share higher in East at 35% of the portfolio mix, South lost ground to North in the sales of pre-owned car market. The Southern India dropped to 26% from 28% while the north increased to 38% from 33%. The 5-7 years vehicles dominate, closely followed by 8-10 years. Urban demand dominates the pre-owned car industry market with nearly 70 per cent share.

Do you think EVs will boost the industry in the long run?

The share of EV in new car sales is expected to grow by 4% till FY 26 and will witness a major push of 20% by FY31. The share of EV in pre-owned car sales will be less than 5% by FY31.

How will the chip shortage impact the pre-owned car market?

The used car market is witnessing a great boom currently. There are several significant growth driving factors like the urge for personal mobility due to the on-going pandemic and global semiconductor chip shortage resulting in longer waiting periods. The new car production is affected due to the chip shortage, resulting in the surge in demand for best-selling fast moving models.  In the last couple of years, we have witnessed a surge in e-transactions on online used vehicle platforms, giving a massive boost to the ecosystem.

Which segment is dominating the pre-owned car sales?

Between Q4 FY21 to Q2 FY22, sales of fast-moving models like Alto 800, Swift, Scorpio, Santro, and WagonR to name a few have gone up on our platform at a promising rate.

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