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New rules soon for used car business

According to some studies, in FY21, around 3.5 million used cars were sold in India, which is expected to hit 7 million by 2026. (Photo: Mint)Premium
According to some studies, in FY21, around 3.5 million used cars were sold in India, which is expected to hit 7 million by 2026. (Photo: Mint)

Under the new rules, the vehicle sale will be executed through a dealer, and there will be no link between the original owner and the new buyer. The dealer will be responsible for updating the new owner’s details in the state transport office.

NEW DELHI : Used car dealers must secure an authorization certificate from the respective state transport authority and transfer vehicle ownership to their names to conduct their business under draft rules notified by the Union road ministry on Thursday.

The ministry said the amendments to the Central Motor Vehicle Rules, 1989, aim to boost transparency and build a comprehensive regulatory ecosystem for the pre-owned car market.

Under the new rules, the vehicle sale will be executed through a dealer, and there will be no link between the original owner and the new buyer. The dealer will be responsible for updating the new owner’s details in the state transport office.

The draft rules outline the procedure for transferring the vehicle from a registered owner to the dealer and clarify the powers and responsibilities of the dealer. The new rules will empower dealers to apply for renewal of registration certificates, fitness certificates, duplicate registration certificates, and no-objection certificates for transfer of ownership. Dealers will also have to maintain an electronic vehicle trip register with details of the trips undertaken, purpose, driver, time and mileage.

“The used car market in India has grown significantly over the past few years with the advent of players like us," said Kunal Mundra, chief executive officer-India, of Cars24, a pre-owned vehicles marketplace. “It still has huge headroom for growth, and the regulatory support is absolutely critical for achieving this. These proposed changes are definitely a step in the right direction, and if they are accompanied by digitization of RTOs as well as a unified pan-India road tax structure, then we will truly have the right regulatory platform to drive greater car ownership in India," Mundra said.

“These rules are expected to aid in recognizing and empowering intermediaries/dealers of registered vehicles as well as provide adequate safeguards against fraudulent activities to the selling or purchasing of such vehicles," a road ministry statement said.

“Regulation of the used vehicle market was a need for a long time. Hope this is executed as fast as possible," Nikunj Sanghi, a former president of the Federation of Automobile Dealers’ Associations and managing director of JS4Wheel, said in a tweet.

“Taking the liability off the owner once they have sold their car is a step in the right direction. Making the dealer accountable will help with expedited transfer to buyer’s name, which is currently not taken seriously," said Banwari Lal Sharma, CEO-consumer business, CarTrade Tech Ltd.

India’s pre-owned car market has been expanding and has seen the emergence of several online marketplaces involved in buying and selling. However, there have been complaints about vehicle transfer to new owners, third-party damage liabilities and difficulty in determination of defaults. The amendments aim to address all these concerns. The ministry has invited comments and suggestions from stakeholders within 30 days.

According to some studies, in FY21, around 3.5 million used cars were sold in India, which is expected to hit 7 million by 2026.

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